S&P rating alert: Hung parliament can trigger a downgrade

India’s sovereign rating may come under pressure if general elections due by May next year end up with a hung parliament or with a government unable to push through reforms, Standard & Poor’s said on Wednesday.

“If it is a hung parliament or if the government is unable to effect reforms, definitely by implication the rating will come under pressure,” said Terry Chan, credit analyst at Standard & Poor’s during a teleconference with reporters.

Indian markets reacted negatively after S&P’s warning with the BSE Sensex hitting an intraday low of 21,088.

S&P has a “negative” outlook on India’s sovereign ratings, meaning any downgrade from its current “BBB-minus” would place the country’s debt in so-called “junk.”

Reuters