Dealers in the overseas bond market said that while the ICICI paper maturing in 2007 was trading 300/320 basis points above the long-term US treasury benchmark, the 9.375 per cent Reliance paper maturing in 2008 was trading at 370/380 basis points above the 30 year US treasury benchmark.

"There is lot of demand for Indian papers, after the Moody's revision", an overseas bond trader said. In the London market, the ICICI American Depository Share (ADS) was up $3 in opening trades and was trading at $12.60. The GDR was trading at $12.80.

On September 30, the Reliance paper was quoting at 420/450 basis points above US treasury while the ICICI paper was trading at 415/445 basis points above the same benchmark.

The Moody's revision has been welcomed by Indian bankers. The State Bank of India chairman GG Vaidya said that it was positive development. "It shows the resilience of the Indian economy. The cost of overseas borrowing will come down substantially because of the revised rating. We are planning a overseas borrowing and this is good news," Vaidya told The Financial Express.

Added senior general manager at ICICI Ltd Kalpana Morparia: "Moody's revision (of India outlook) is a precursor to a upward rating movement for India's rating. This will have an impact on any Indian entity going for an international offering now as it will be very successful."

According to her, the other impact will be on the Indian overseas debt paper where the yields on the papers are expected to tighten after the Moody's revision of India's rating.

Senior bankers felt that while the tangible and the more immediate impact of the Moody's move will be on the Indian overseas debt paper, the more intangible and the long-term impact will be on future international offerings from Indian entities. "There will be more appetitite for Indian paper as this developement adds to the feel good factor," one public sector banker said.

Earlier, bullishness to a degree had returned to international investors after the Indian electorate voted for a stable government.

In the first sovereign rating outlook change for India this year, Moody's Investors Service has raised the outlook to positive from stable for India's Ba2 ratings on foreign and domestic currency debt.

"The country's balance of payments remained resilient through the recent Asian/Russian crises, as well as through the international sanctions that were imposed following India's May 1998 nuclear tests," Moody's said. In addition, the external debt maturity structure improved and foreign reserves strengthened in recent years, reducing the country's vulnerability to external shocks.