However, experts warn that the upgrade will not immediately channel funds on the debt market. | Photocredit: Reuters
The market for government effects (G-SECs) gathered on Thursday about expectations of foreign portfolio investor (FPI) in the debt market, after S&P Global has upgraded the sovereign rating of India from ‘BBB’ to ‘BBB’, with a stable prospect.
The 10-year-old benchmark G-SEC (6.33 percent GS 2035) collected around 50 Paise, with his yield that eight basic points (BPS) fell to close by 6.40 percent compared to the previous closure of 6.48 percent.
In her reason for the rating -upgrade, S&P Global noted that India gives priority to tax consolidation, which demonstrates the political dedication of the government to deliver sustainable public finances, while retaining its strong infrastructure drive.
Furthermore, the robust economic expansion has a constructive effect on India’s credit statistics, and the Global Rating Agency expects that solid economic fundamentals will support the growth of the next two to three years. In addition, monetary policy institutions have increasingly become conducive to managing inflatory expectations.
Slow and stable …
The proceeds from the 10-year-old benchmark G-SEC had broken the 6.5 percent marking on Wednesday after it was issued in May 2025. This came in the midst of a dip in the net direct tax collection in the tax to date, so that speculation in the bond market can be activated in the bond market that the government can borrow more in FY26 to provide the possible shortcoming in the income collection.
Marzban Irani, Chief Investment Officer, LIF MUTual Fund, noted that the yield of the benchmark paper could gradually go to the level of 6.25 percent as soon as the volatility entered the moderates of the currency and foreign investors because of the sovereine rating congrade.
Furthermore, the upgrade can also support the absorption of the sovereign debts of India in other global indices.
“Although the sovereign rating upgrade is a positive development, foreign investors will not immediately channel funds on our debt market. The inflow of foreign funds will take place over a certain period,” Irani said.
The LIC MF fixed-interest CIO expects a repo-interest reduction in the bi-monthly monetary policy assessment in October in the midst of low retail-in-trade inflation, since the growth figures that will come this month can reflect a delay.
Madhavi Arora, Chief Economist, Emkay Global Financial Services, said: “Despite possibly better FPI debt flows, the demand of domestic agents does not remain convincing, especially the longer end.”
“Although we believe that the tariff shift cycle can still have room to walk, the markets do not praise the same, so that the steepness of the G-SEC is further helped.
Published on August 14, 2025
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