S&P’s India sovereign credit rating upgrade to BBB is seen as a positive by market players and they expect it to provide some relief at a time the market sentiment has been down due to US President Donald Trump’s tariff announcements.
Sonal Varma, chief economist (India and Asia ex-Japan) at Nomura Holdings, said that the upgrade is a shot in the arm for market sentiment, given other negative headlines around US tariffs.
Nilesh Shah, MD, Kotak AMC added, “The rating upgrade is better late than never. It will give psychological comfort to investors, especially global ones.”
Market performance and fund flows
On Thursday, Indian equity benchmarks snapped its six-consecutive weekly fall and ended the truncated week nearly 1% higher. For the day, Nifty 50 and Sensex closed flat at 24,631.30 points and 80,597.66 points respectively. Domestic institutional investors supported heavily even as a BofA Securities survey showed that India is the least preferred market in Asia.
DIIs put in nearly Rs 19,000 crore this week even as FPI outflow was around Rs 7,804.28 crore. BSE Midcap and BSE Smallcap also snapped their three-week fall and ended the week 0.9% and 0.4% higher respectively.
Broader impact and outlook
Dhiraj Relli, MD & CEO of HDFC Securities said that the upgrade will strengthen the rupee and reduce bond yields, enhancing macroeconomic stability. “Overall, the BBB rating marks a significant positive for Indian equity markets, reaffirming India’s position as a stable, attractive investment destination likely to deliver immediate gains and lasting benefits for stocks and broader capital markets,” he said.
He further noted that some sectors, particularly those capital-intensive or relying on foreign capital, may see a more direct benefit. “The upgrade is a long-term catalyst, and the market’s day-to-day movements will still be influenced by other factors, such as geopolitical events and corporate earnings,” he said and noted other major rating agencies like Moody’s and Fitch still have India at the lowest investment grade, a similar upgrade from them would further reinforce the positive trend.
But Varma said, “The impact on flows purely from the rating upgrade may not be much, since the other two rating agencies still have India’s sovereign rating one notch lower and with a stable outlook.”
With the end of the Q1 earning season, investor focus would shift towards the upcoming geopolitical developments, while markets would likely remain in a consolidation mode, said Siddhartha Khemka – Head Of Research, Wealth Management, Motilal Oswal Financial Services Ltd.
Among sectoral indices, Nifty Healthcare and Nifty Pharma were the top gainers ending the week around 3.5% higher and Nifty Auto also gained 2.7%. Nifty Consumer Durables and Nifty FMCG were the only indices that fell.