For markets that were on a positive run, Moody’s India outlook downgrade to ‘negative’ from ‘stable’ was a dampener on Friday. Sensex ended its run to hit historical highs settling down at 40,323.61 and NSE Nifty by 104 points to 11,908.

Nifty, the most traded index among the two had climbed 451 points or four per cent over past eleven trading sessions, but profit booking over the negative news from the rating agency pulled equities down.

Along with it came the worry of a weaker currency, and the higher interest, which Indian companies are trying to tap foreign funds might have to shell out.

Domestic institutions had turned sellers too, and the markets are looking forward to increased participation from foreign institutional investors (FIIs), and that was also one reason market eagerly tracking the recent MSCI rejig.

“Considering that we are in low growth era, we may see some interest emerging in quality small and mid-cap value stocks. In large caps, there will be interest in select few stocks. The silver lining for markets is that FIIs have turned net buyers in Indian markets. However, we need to see their stance, post-Moody’s downgrade,” said Anita Gandhi, director, Arihant Securities.

Even as the news on the economic side was being digested came the long-expected verdict in the Ayodhya issue on Saturday.

Though analysts feel, there may not be a direct impact on markets from the judgement, resolution of a long-pending issue is considered a sentimental positive for the country.

“This event will have a long term outlook as far as global outlook on India is concerned … Some social issues, which have equal importance for the nation to grow, if they are resolved, then the confidence level of investors grow manifold. That is why, I feel even though we will not see a direct impact on the markets, but perception about the country in the eyes of global investors will significantly differ,” said Deven Choksey, MD, KR Choksey Investment Managers.

Overall market sentiment is still loaded towards the hope that the government stimulus packages together with the lowering of rate by Reserve Bank of India (RBI) would push growth. Markets would start guessing how much more can RBI cut rates and also the impact of late rainfall on agricultural growth.

“Now that the issue of Ram temple is settled, we can pray to God for economic growth prosperity and peace. As PM has said this is not victory or defeat of anyone but is a settlement of a religious issue that became political. It’s a unanimous decision of five learned judges. Amen!,” tweeted Nirmal Jain, chairman, IIFL Group.