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Sovereign downgrade fails to move markets

       
Yashwant Sinha

When international rating agencies announced a negative outlook on India's sovereign rating in early August, the equity and bond markets barely reacted.


That was not because they disagreed with the assessment but because the rating actions confirmed what the market already knew. Sunil Gulati, head of investment banking at ING Barings, says: "Second-generation reforms have simply not taken off."


An economist at a large US investment bank adds: "The market [index] is down from 6000 to 3300; that's a verdict on economic reforms." Ullal Bhat, chief investment officer, Jardine Fleming Asset Management, takes a slightly different view: "The outlook is negative, but given how bad things are in some east Asian countries today, there is a feeling that India is not doing so badly."


Standard &Poor's lowered its outlook on India's sovereign rating on domestic bonds to triple B minus from Triple B.




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