S&P upgrades outlook on India's sovereign rating to 'positive'

S&P Global Ratings raised India's sovereign rating outlook to 'positive' from 'stable' while retaining the rating at 'BBB-', saying on Wednesday the country's robust economic expansion was having a constructive impact on its credit metrics.

"We expect sound economic fundamentals to underpin the growth momentum over the next two to three years," S&P said, adding that regardless of the election outcome, it expected broad continuity in economic reforms and fiscal policies.

India's marathon national election lasting six weeks, the world's largest, is in its final stage with votes scheduled to be counted on June 4, and investors are gearing up for Prime Minister Narendra Modi securing a third term in office.

Finance Minister Nirmala Sitharaman called the upgrade a "welcome development".

"This reflects India's solid growth performance and a promising economic outlook for the coming years," said in a social media post.

The rating agency's positive outlook on India is predicated on its robust economic growth, pronounced improvement in the quality of government spending, and political commitment to fiscal consolidation, it said.

"We believe these factors are coalescing to benefit credit metrics," S&P analysts wrote in a note.

The Indian rupee was off its day's lows while the benchmark 10-year bond yield eased three basis points to 6.99% after the outlook upgrade.

India's weak fiscal settings had always been the most vulnerable part of its sovereign ratings profile, S&P said.

Elevated fiscal deficits, a large debt stock and interest burden persist, but the government is prioritising ongoing consolidation efforts, it added.

"With economic recovery now well on track, the government is again able to depict a more concrete (albeit gradual) path