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Standard & Poor threat to junk India spooks investors
Clean Media Correspondent
MUMBAI, June 12 (CMC) An unexpected warning by global ratings major S&P on the possibility of India losing its investment grade sovereign rating spooked investor sentiments on Monday, a day that started on a strong note for markets globally after the European leaders agreed to a $125-billion bailout for the Spanish banking system.
The S&P warning also led the rupee to weaken against the dollar by 27 paise to 55.73, while the sensex reversed its five-session winning run to end 51 points in the red at 16,668. The slide in the stock market left investors poorer by Rs 21,000 crore with BSE's market capitalization now at Rs 58.9 lakh crore.
The warning that India may be relegated to a junk bond status jolted Dalal Street investors and led to a 225-point fall in the sensex from its intra-day high. However, institutional players who deal with FIIs, the most influential of the investor groups on the Street, feel the warning could turn out to be positive for the market and the country. "This is a warning to the government to pursue its economic agenda which will lead to faster GDP growth," said Dharmesh Mehta, MD (institutional equity), Enam Securities. "After reading the logic behind S&P's warning, I see this as a positive development for the economy and the market. This would push the government to move faster on reforms, with RBI helping through rate cuts," Mehta said.
Standard & Poor threat to junk India spooks investors
Clean Media Correspondent
MUMBAI, June 12 (CMC) An unexpected warning by global ratings major S&P on the possibility of India losing its investment grade sovereign rating spooked investor sentiments on Monday, a day that started on a strong note for markets globally after the European leaders agreed to a $125-billion bailout for the Spanish banking system.
The S&P warning also led the rupee to weaken against the dollar by 27 paise to 55.73, while the sensex reversed its five-session winning run to end 51 points in the red at 16,668. The slide in the stock market left investors poorer by Rs 21,000 crore with BSE's market capitalization now at Rs 58.9 lakh crore.
The warning that India may be relegated to a junk bond status jolted Dalal Street investors and led to a 225-point fall in the sensex from its intra-day high. However, institutional players who deal with FIIs, the most influential of the investor groups on the Street, feel the warning could turn out to be positive for the market and the country. "This is a warning to the government to pursue its economic agenda which will lead to faster GDP growth," said Dharmesh Mehta, MD (institutional equity), Enam Securities. "After reading the logic behind S&P's warning, I see this as a positive development for the economy and the market. This would push the government to move faster on reforms, with RBI helping through rate cuts," Mehta said.
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