Indian equities, which had been under pressure in the last few days, rebounded strongly on Friday as investors cheered Moody’s Investors Service’s decision to upgrade the country’s sovereign credit rating after a gap of 13 years.
The benchmark stock barometers, which climbed more than 1% during morning trading, surrendered some gains later in the session in the face of profit booking.
The BSE’s 30-share Sensex gained more than 400 points during the day to touch an intraday high of 33,520.82. The index closed at 33,342.80, up 235.98 points or 0.71%. Sensex constituents like Cipla, HDFC, Maruti Suzuki and Tata Steel all gained more than 2% each.
The overall market breadth was also strong with 1,615 stocks gaining ground, as against 1,135 declines. The broader Nifty of the National Stock Exchange (NSE) closed at 10,283.60, up 68.85 points or 0.67%.
The U.S.-based credit rating agency, which upgraded India’s sovereign credit rating by a notch to ‘Baa2’ with a stable outlook, had last raised the rating to ‘Baa3’ in 2004. In 2015, Moody’s had changed the rating outlook to ‘positive’ from ‘stable’.
Sudhakar Shanbhag, chief investment officer, Kotak Mahindra Old Mutual Life Insurance, said that while foreign investors had been net sellers in most months in the recent past, the rating upgrade would make them review their equity exposure.
“This upgrade may make them review the country allocation weight. However equity markets in the medium term will focus on the long overdue earnings improvement before we see a substantial uptick,” said Mr. Shanbhag. “The downside though is currently protected based on [domestic] flows,” he added.
Rupee, bonds gain
The rupee wiped out almost all the losses it had sustained so far in November after Moody’s rating upgrade buoyed the outlook for the Indian currency. Intraday, the rupee strengthened as much as 1% against the dollar — its biggest gain in more than one month — and ended the day at 65.01 per dollar. However, the rupee still continues to be among the worst performing currencies in Asia this month.
Going ahead, the rupee is expected to strengthen on the back of foreign inflows.
“Improved sentiments and FPI flows will likely provide a fillip to the Indian rupee unless the RBI intervenes heavily,” Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank, wrote in a note to clients.
“We now expect USD-INR to trade in the 64.25-65.75 range for the rest of FY2018, averaging 64.8 in FY2018 compared to 65.25 earlier,” she added.
Yields on the 10-year benchmark government bond fell by about 12 basis points (bps) intraday, before closing 1 bps lower at 7.05%, as compared to its previous close.
