The Indian rupee witnessed strong declines during yesterday's trading; recording the worst performance in the Asian currency market against the dollar.
The recession came against the backdrop of the decision of the "middle" agency to reduce its outlook for the country's credit rating to negative, pointing out that this decision reflects the increased risk of a long-term economic slowdown and high levels of debt.
Sovereign stocks and bonds in the Indian capital market have also suffered modest losses from the downgrade.
The decline comes at a time when investors were skeptical about the ability of the Indian government to achieve budget targets, amid a decline in tax revenues and tax exemption for companies during the month of September 20 billion dollars.
The rupee depreciated 0.5 percent against the dollar to $ 71, the biggest decline in the Indian currency in three weeks, while stocks and bonds suffered minor losses.
Investors saw the move as a call for action that should have been taken earlier, not as a warning of the country's credit rating, as Moody's put India's credit rating above the ratings of Fitch and Standard & Poor's.
The Indian government responded to Moody's decision to take a series of financial measures and other reforms to boost the economy, which is still well established.
"India will continue to work for promising growth opportunities in the short and medium term," a Finance Ministry statement said.
Moody's pointed out that its decision partly reflected the government's effectiveness and measures in addressing long-standing economic and institutional weaknesses below previous agency estimates.
Moody's has maintained its credit rating outlook for the Federal Reserve Bank of India, the source of foreign and domestic currency, unchanged at the BAA2 level.
India's economy grew only 5 per cent year-on-year between April and June, marking the slowest pace of growth since 2013.
In October, the Reserve Bank of India (RBI) revised its forecast to cut GDP growth this fiscal year from 6.9 percent to 6.1 percent.