Fitch Ratings has revised the Outlook on India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable and affirmed the rating at ‘BBB-‘.
The revision of the Outlook to Negative on India’s Long-Term IDRs reflects the following key rating drivers:
The coronavirus pandemic has significantly weakened India’s growth outlook for this year and exposed the challenges associated with a high public-debt burden. Fitch expects economic activity to contract by 5% in the fiscal year ending March 2021 (FY21) from the strict lockdown measures imposed since 25 March 2020, before rebounding by 9.5% in FY22. The rebound will mainly be driven by a low-base effect. Our forecasts are subject to considerable risks due to the continued acceleration in the number of new COVID-19 cases as the lockdown is eased gradually. It remains to be seen whether India can return to sustained growth rates of 6% to 7% as we previously estimated, depending on the lasting impact of the pandemic, particularly in the financial sector.
The humanitarian and health needs have been pressing, but the government has shown expenditure restraint so far, due to the already high public-debt burden going into the crisis, with additional relief spending representing only about 1% of GDP by our estimates. Most elements of an announced package totalling 10% of GDP are non-fiscal in nature. Some further fiscal spending of up to 1 percentage point of GDP may still be announced in the next few months, which was indicated by a recent announcement of additional borrowing for FY21 of 2% of GDP, although we do not expect a steep rise in spending. (more…)
Dunno, at least until the November US election we can expect US-China differences to be swept under the carpet? Or, maybe not?
If Moody’s track record is any indication, then now is the time to buy the stocks of manufacturers relating to agricultural, transportation and utilities industries.
Moody’s downgraded its outlook on Britain’s debt (currently rated Aa2) to negative from stable after the market close on Friday, saying Brexit had been a catalyst for an erosion in the country’s institutional strength, perceived “material deterioration” in UK governance, and that the country’s ability to set policy has weakened in the Brexit era along with its commitment to fiscal discipline.
The outlook cut represents a catch down to its competitors: the UK is currently rated AA by S&P and AA- at Fitch Ratings, with both companies having the UK on negative watch.
“It would be optimistic to assume that the previously cohesive, predictable approach to legislation and policymaking in the UK will return once Brexit is no longer a contentious issue, however that is achieved,” the ratings agency said adding that “the increasing inertia and, at times, paralysis that has characterized the Brexit-era policymaking process has illustrated how the capability and predictability that has traditionally distinguished the U.K.’s institutional framework has diminished.”
“The decline in institutional strength appears to Moody’s to be structural in nature and likely to survive Brexit given the deep divisions within society and the country’s political landscape,” Moody’s added.
The decision to put the UK on negative outlook even as Moody’s affirmed Britain’s Aa2 long-term issuer and senior unsecured ratings comes one month before an election that is likely to determine the future of Brexit. While the election will have a big impact on Brexit, this week has seen both sides escalate their spending pledges, drawing election battle lines with plans to end a decade of U.K. austerity. (more…)
Moody’s Investors Service (“Moody’s”) has taken a number of rating actions on Indian non-financial corporates, following its earlier announcement that it has changed the outlook on India’s Baa2 sovereign rating to negative from stable.
As a result of the sovereign rating action, Moody’s has changed the outlook on the ratings of the following companies:
Bharat Petroleum Corporation Limited (BPCL): Affirmed Baa2 foreign currency issuer and senior unsecured debt ratings and revised outlook to negative from stable. Also affirmed the (P)Baa2 foreign currency senior unsecured rating on the MTN program. The ba1 baseline credit assessment (BCA) is affirmed.
Hindustan Petroleum Corporation Ltd. (HPCL): Affirmed Baa2 foreign currency issuer and senior unsecured debt rating and revised outlook to negative from stable.
Indian Oil Corporation Ltd (IOCL): Affirmed Baa2 foreign currency issuer and senior unsecured debt ratings and revised outlook to negative from stable. The ba1 BCA is affirmed.
Oil and Natural Gas Corporation Ltd. (ONGC): Affirmed Baa1 local and foreign currency issuer rating; revised outlook to negative from stable. Also affirmed the (P)Baa1 foreign and local senior unsecured ratings on the MTN program. The baa1 BCA is affirmed.
Oil India Limited (OIL): Affirmed Baa2 local and foreign currency issuer and foreign currency senior unsecured debt ratings; revised outlook to negative from stable. The baa3 BCA is affirmed.
Petronet LNG Limited (PLL): Affirmed Baa2 foreign currency issuer rating; revised outlook to negative from stable.
Infosys Limited (Infosys): Affirmed A3 local currency issuer rating and revised outlook to negative from stable.
Tata Consultancy Services Limited (TCS): Affirmed A3 local currency issuer rating and revised outlook to negative from stable.
A full list of affected ratings is provided towards the end of this press release.
RATINGS RATIONALE (more…)
Moody’s Investors Service on Thursday changed its outlook on India’s ratings to “negative” from “stable”, citing increasing risks that the country’s economic growth will remain lower than in the past.
The outlook partly reflects government and policy ineffectiveness in addressing economic weakness, which led to an increase in debt burden from already high levels, the ratings agency said. (bit.ly/2NopI10)
India’s economy grew only 5.0% year-on-year between April and June, its weakest pace since 2013, as consumer demand and government spending slowed amid global trade frictions.
