MUMBAI, May 30 Reuters Citi expects SP Global Ratings39; to upgrade India39;s sovereign rating by late 2026 given the ratings agency39;s confidence in the South Asian nation39;s macro drivers as well as the flow of economic and political cycles, it said on Thursday.

SP raised India39;s sovereign rating outlook to 39;positive39; from 39;stable39; on Wednesday, citing the country39;s strong economic fundamentals. It, however, kept the rating itself at 39;BBB39;.

In the past, SP had a positive outlook on India in mid2004 and mid2006. In both instances, an actual rating upgrade happened within six months, Citi economists wrote in a note.

They expect an upgrade around late 2026 but said it could happen earlier if SP felt confident about India39;s fiscal trajectory.

Citi said India39;s fiscal health was probably the main weakness in SP39;s rating profile and an improvement would be the key to an upgrade.

India aims to narrow its fiscal deficit to 4.50 of gross domestic product by the end of 202526, from an expected 5.8 in 202324.

The discussion among market participants will now move from the possibility of a rating upgrade to the timing of one, Citi said.

That positive sentiment, it added, should help depress risk premium for Indian debt and alter external borrowing costs for corporates.

SP39;s action, Citi said, reaffirmed its longheld view of the benchmark 10year bond yield moving toward 6.50 by March 2025 from around 7 currently.

DBS reiterated Citi39;s view,…