The first BRIC to bust


In 2001, Jim O’Neil first coined the acronym “BRIC” when referring to the shift in economic development from G7 nations, to the big four: Brazil, Russia, India and China. These countries have continued to grow since then, however India is now on the way down as S&P recently warned that they might soon lose their investment-grade status. The India Times reports on the development:

“The Indian markets corrected sharply on Monday, snapping five days of gains, after S&P said the country could become the first among the BRIC economies to lose its investment-grade status.”

“India’s sovereign rating is BBB-, the lowest investment grade rating, and in April S&P lowered its outlook on the rating for Asia’s third-largest economy to negative from stable.

The S&P warning against India is clearly a negative sign for the markets and it could hurt foreign fund flows at least for the short term, according to analysts.”

We have collected views from various experts on the impact of S&P warning on markets:

Vaibhav Agrawal, VP – Banking, Research at Angel Broking

June is likely to remain a choppy month for Indian markets as more than the S&P downgrade it is developments in the euro zone that are going to determine the direction.

We would not give too much weightage to the S&P downgrade – they have been downgrading almost the entire world, including the US and while there are concerns globally as well as in case of India, but in our view, India remains one of the better placed economies globally to invest in.

A. K. Prabhakar, Senior Vice President – Equity Research at Anand Rathi

S&P statement is very negative for Indian market as this would spook already weak foreign flows, which has improved in last few days on account of positive global cues. Rating downgrade would keep pension funds and other long term funds away from India.

Market failed to cross 5125 level on the Nifty and below 4950 levels things will become negative. Also, Nifty was unable to sustain levels above its 200-DMA which is placed at 5066.”

Continue to the full article…


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