Right after Standard & Poor's Ratings Services downgrade India's rating to negative from stable, the rating agency revised its rating outlooks on India's leading IT companies TCS, Infosys and Wipro to negative from stable too. At the same time, it affirmed its 'BBB+' long-term corporate credit ratings on these entities.
The negative outlook jeopardizes India's long-term rating of BBB-, the lowest investment grade rating, and sent Indian bonds, stocks and the rupee lower. " We could lower our T&C assessment if we downgrade the sovereign credit rating," Standard and Poor's said in a statement.
On the back of the announcement, the Sensex tanked close to 150 points and the Nifty fell sharply below 5200. Wipro tanked seven percent, while TCS was down 2 percent post the announcement. However, Infosys closed flat.
However, Nilesh Shah of Envision Capital, in an interview with CNBC-TV18 said there is no need to panic yet because this impact will only last for a day, a week at most.
But in an environment where global investors are already spooked by the new proposed changes in India's anti-tax avoidance scheme and the resurgence of eurozone crisis, S&P's warning is sure to drive FIIs further out of India. Gaurav Kapoor, analyst at RBS believes the situation will not change drastically from here because flows are already tepid. He told CNBC-TV18 that global investors will be more focused on what comes out of today's Fed meet because that is more important than the immediate negative news from India.
But with such poor fundamentals isn't it high the government jumpstarts its reforms process and control its deficit?
Updated Date: Dec 20, 2014 17:26:32 IST