REUTERS - Fitch Ratings revised India's sovereign rating outlook to "stable" from "negative" on the back of measures taken by the government to contain the budget deficit, it said on Wednesday.
It expects the government to broadly meet its 2013/14 fiscal deficit target of 4.8 percent of the gross domestic product, it added.
Fitch had cut India's outlook to negative in June 2012, following Standard & Poor's which just last month retained its negative outlook on the economy.
COMMENTARY
JYOTINDER KAUR, ECONOMIST, HDFC BANK, NEW DELHI
"The Fitch reaction is perhaps some kind of an acknowledgement by a ratings agency of whatever little traction that has been achieved in fiscal consolidation. For a market desperately looking for positive news, this is a sentiment booster."
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI
"While the outlook has been revised from negative to stable, the ratings remain constrained at BBB- due to the persistence of structural problems. Yet, the outlook revision will soothe the investors' nerves, who are overly worried about the country's macroeconomic and financial stability."
ARUN KEJRIWAL, FOUNDER, KEJRIWAL RESEARCH & INFORMATION SERVICES, MUMBAI
"Why they have come up with this upgrade one doesn't understand because the situation in the economy does not seem to have improved much.
"The market is looking for cues to start upgrading or becoming positive. I am not sure this is enough to bring about a positive sentiment. The feel good factor because of this upgrade cannot last beyond 24 to 48 hours."
SHAKTI SATAPATHY, FIXED INCOME ANALYST, AK CAPITAL, MUMBAI
"Today's outlook upgrade would give some medium term respite (6 months - 12 Months) and is largely a factor of government's reform measures for putting the fiscal house in order. However, the consistency in introducing more reforms would count in the coming days, which looks a tad difficult given the election year ahead.
"Having said that, the stable outlook would give some near term stability in the domestic currency and bond market."
ANJALI VERMA, ECONOMIST, PHILLIPCAPITAL, MUMBAI
"The battered rupee will see some positive effect as a result of the outlook upgrade. It could attract some more flows from foreign investors.
"However, I do not think this changes anything at this juncture for the economy. Consumer inflation is still up, industrial production is low. RBI (Reserve Bank of India) is likely to hold rates steady on June 17."
JAGANNADHAM THUNUGUNTLA, EQUITY HEAD AT SMC GLOBAL SECURITIES, NEW DELHI
"Starting from September, the measures taken by the government are now getting slowly recognised by the rating agencies. For the markets, which have been facing a lot of negative news these days, this development is a welcome relief.
"But challenges remain on the macro economy front, with the weakening rupee and the uncontrollable current account deficit. There is still a long way to go for a rating upgrade. The overall enthusiasm created by this move will cool down by no rate cut by the central bank on Monday."
SONAL VARMA, ECONOMIST, NOMURA, MUMBAI
"The outlook upgrade acknowledges that recent government measures are in the right direction and that the economy will slowly start to improve."
V BALASUBRAMANIAN, VICE PRESIDENT, IDBI ASSET MANAGEMENT LTD, MUMBAI
"It has come at a time when the rupee has weakened substantially and the markets have corrected drastically. Maybe for overseas investors, it would give them some confidence to stay invested here."
MARKET REACTION
* The benchmark 10-year bond yield dropped 4 basis points to 7.28 percent after the Fitch announcement.
* The rupee extended gains to as much as 57.74 to a dollar from 57.97 beforehand.
* The stock market was closed before the announcement. (Reporting by Mumbai markets and treasury teams)
