Moody’s Investors Service (Moody’s) downgraded the Government of India's foreign-currency and local-currency long-term issuer ratings to Baa3 from Baa2 and maintained a negative outlook. The downgrade came after market hours on Monday. READ ABOUT IT HERE

Here's how leading analysts have interpreted the development and its likely impact on the markets.

Abhimanyu Sofat, head of research, IIFL Securities

Moody's decision to lower India's rating is a reflection of the stress in Indian economy and fiscal situation that has been amplified by the virus outbreak. We believe the subdued policy response for short term alleviation of the lockdown related stress would lead to subdued economic growth and lower tax collection. This is likely to aggravate the weakness in credit profile of India. The policy of balancing act seems to have not given the desired results.

Ajay Bodke, chief executive officer for portfolio management services (PMS) at Prabhudas Lilladher

Rigid, inelastic & ever-rising pressure on government finances from salaries and interest payments juxtaposed against sharply dwindling taxation revenues leading to persistent missing of medium-term fiscal consolidation targets have proved to be the Achilles heel for India's economic downgrade by Moodys.

The move should provide a dose of sobering reality to equity markets that are punch drunk on a torrent of global liquidity and exuberant about rapid return of aggregate demand in the wake of lifting of lockdown.

V K Vijayakumar, chief investment strategist at Geojit Financial services

Even though it is a downgrade, the rating is still in investment grade. This is on-par with the rating of S&P & Fitch and is unlikely to impact the market materially, since the strength of the market is largely due to the humongous liquidity floating in the global financial system. The government needs to prepare a medium-term fiscal consolidation roadmap to inspire confidence in markets. That said, the development is slightly sentiment negative.