Rating agency shares soar on corporate bond boost

Share prices of the three listed rating agencies soared following the measures announced Reserve Bank of India (RBI) for development of the corporate bond market. Investors lapped up shares of rating agencies on Friday's trade on hopes that their revenues will get a boost as bond issuances will go up following the new norms.

Credit Analysis and Research (Care) gained the most at 5.3%, followed by Icra at 4.4% and Crisil added 2.3%. Trading volumes in all the three counters were much higher compared to last few sessions.

To ease corporate dependence on bank credit, the RBI on Thursday announced a slew of changes, which experts said will give a fillip to the corporate bond market. Some of the new measures include allowing overseas investors direct stock market and OTC access, imposing risk-weightage for unrated bank exposure and reducing partial credit enhancement limit. RBI also allowed banks to issue bonds through masala bonds.

"The measures will reduce the disproportionate role that bank loans have in corporate funding, materially improve corporate bond market liquidity, and afford greater role for global investors. These guidelines and follow-throughs, if effectively implemented, will help the corporate bond market in India to finally bloom," said Pawan Agrawal, chief analytical officer, Crisil Ratings.

Market players, however, said Friday's upmove was largely based on euphoria and any material impact on the financials of rating firms will be in the long term.