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October 11, 2000
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Money > Stocks > Market Impact > Report October 11, 2000 |
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S&P's downgrade not to hit FII inflowsNetScribes/Salil Panchal Standard & Poor's (S&P) downward revision of India's foreign currency issuer rating is expected to impact sentiments on the equity markets in the near future. However, it is not seen affecting foreign inflows into the country. A section of the market feels that Tuesday's downgrade is an early warning to the country to get its act together and speed up the reforms process. S&P has revised India's foreign currency issuer rating from 'positive' to 'stable', thus bringing it back to the rating it held in March this year. "India's foreign currency borrowing programme will be impacted. Although India is not planning any major foreign currency borrowing in the coming weeks (considering the current rupee-dollar rate), it will impact sentiment. Foreign inflows into the equity markets will not be impacted as the rating is not a direct factor," says Euan MacDonald, HSBC's country head, investment banking, in India. According to K R Bharat, country head of Credit Suisse First Boston, while the downgrade would have an indirect impact on the equity markets, it would not impact inflows immediately. "The message is clear. This is an early warning sign for the country to get its act together and act fast on its reforms and privatisation programmes." S&P has said that the revision outlook is largely due to fears on the fiscal side. The agency has said that it would consider a higher rating at a later stage, provided there's a stronger political commitment to reduce the fiscal deficit. The equity markets, meanwhile, continue to be plagued by weakening sentiments. The BSE Sensex lost another 108.77 points on Wednesday to close at 3,836. Dileep Madgavkar, chief investment officer at Prudential ICICI Asset Management Company, says the downgrade assumes a different meaning against the backdrop of a bearish market. "If it was a bullish scenario, the rating would have been ignored. But it would be looked at more seriously now."
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