General Awareness

April 04, 2017 @ 01:15 PM

April 04, 2017 @ 01:15 PM

K. J. Somaiya Institute of Management Studies and Research, Mumbai

9 Easy Steps to register for SIMSR (Infographic)

Download Now

What are Moody's ratings and how do they impact our economy?

MBA Aspirants are expected to know on what is new in economy and what is that impacting it? One of the critical factor for understanding is rating given by Moody’s. Read on: What are Moody's ratings and how do they impact our economy?
 
Moody’s Corporation is the parent company of Moody’s Investors Service and Moody’s Analytics. Moody’s Corporation provides credit ratings, which are popularly known as Moody’s ratings.
 
Moody’s ratings provide investors with a grading system and enable them to understand the creditworthiness of securities. It is important to understand the gradations of creditworthiness before jumping into the impact of Moody’s ratings on our economy.
 
There are nine Moody’s rating symbols – Aaa, Aa, A, Baa, Ba, B, Caa, Ca, and C. In addition, Moody’s appends numerical modifiers 1, 2, and 3, to this rating classification from Aa to Caa. 
 
Obligations rated ‘Aaa’ are said to be of the highest quality, subject to lowest level of credit risk, whereas obligations rated ‘C’ are considered the lowest and are typically in default, with little prospect for the recovery of the principal amount and interest. Sometimes, either no rating is assigned or a rating gets withdrawn.
 
These instances occur when the issuer belongs to a group of securities or entities that are not rated as a matter of policy. The credit rating and quality of issuers and their obligations are not constant; in fact, they keep fluctuating, which is why investors should keep close watch of the variations of credit rating before making decisions. 
 
Moody’s India sovereign rating is Baa3, which takes into account the bleeding rupee, weak economic growth of the country, and the twin deficits. Moody’s is the first rating agency to retain the sovereign rating of Baa3, even after the Indian currency dived below 65 to the US dollar.
 In fact, Moody’s is the only rating agency that has a stable outlook on the Indian currency while other rating agencies have declared a BBB- rating with a negative outlook. 
 
Moody’s ratings are a reflection of India’s macroeconomic conditions and domestic economic challenges. In addition, it conveys to investors and the rest of the world that India has a high current account deficit and lower capital flows. 
 
Since investors depend heavily on Moody’s ratings before making a decision on investments and capital flows, it is important to maintain a high ranking to gain points on creditworthiness. Investors are always looking for markets with low credit risk. 
 
So, those with good Moody’s ratings will attract more investments and this will ultimately boost economic growth of a country. This once again has a ripple effect on the development of the country, value of the currency and the current account deficit.
 
Moody’s rating definitely has an impact on the economy and a higher Moody’s rating for a market is sure to enhance its economic standing. Currently, Moody’s optimistic rating of Baa3 is helping to maintain and stabilize confidence of investors, given the market stress that India is facing. Moody’s rating is seen as a reassurance, helps to alleviate investors’ concerns and in turn boost economic growth. 
 
Once Moody’s demotes an economy and gives a lower credit rating, the Indian government will have to pay more interest on its debt to attract lenders. Increased costs to service national debt will ripple through the entire economy. As such, credit card purchases, mortgage rates, and consumer and commercial loans will require increased interest. 
 
Higher interest rate is a disincentive to invest in a down-trending stock market, which is why Moody’s ratings are important for the health of the economy.
 
 
 
Stay informed, Stay ahead and stay inspired with MBA Rendezvous 

Crucial Dates, You Should not Miss

Manav Rachna International Institute
of Research

Admissions Open for all MBA programme at Manav Rachna International Institute of
Research and Studies.
CII School of Logistics Amity University, Delhi and Mumbai
Admissions Open at CII School of Logistics Delhi and Mumbai campus, Apply Now!
GITAM School of International Business, Visakhapatnam
Admissions open for MBA programmes at GITAM. Application Deadline is February 20, 2018
XIME
Application Last Date for Online Submission - February 25, 2018
TAPMI, Manipal
Last date extended to 11 February, 2018. Apply Now.
BIMTECH, Greater Noida
Admissions open at BIMTECH, Greater Noida
ICFAI Business School
Admissions Open at ICFAI Business School Apply Now!
FORE School of Management
Apply for PGDM & PGDM-IB Programmes. Application Deadline is January 18, 2018.
MDI Murshidabad
Applications for PGPM 2018-20 at MDI Murshidabad are open
NIRMA
Last Date to Apply for MBA (Full Time) Programme at NIRMA is January 29, 2018
Institute of Public Enterprise, Hyderabad
Last Date to Apply for IPE, Hyderabad is 21st January, 2018
IMI New Delhi
Admissions Reopened for PGDM Last Date to Apply January 21, 2018
Application closes on February 12, 2018 for Executive PGDM at IMI
K J Somaiya Institute of Management Studies & Research, Mumbai
Last date for Application is 31st Jan, 2018
SDMIMD Mysore
Application for PGDM 2018-20 at SDMIMD is open till February 28, 2018
img

Admission Open Now

Following Colleges are accepting applications.

INTERNATIONAL MANAGEMENT INSTITUTE

Admissions open for 2018-20

PGDM, PGDM (HRM), PGDM(B & FS), Executive PGDM

Apply Online