In its December 2015 issue of 'Inside India', the agency however, said a broad-based and sustainable revival in the private sector capital expenditure cycle will likely take longer to materialise.

"Recent high-frequency data show that India's investment cycle is starting to pick up," Moody's VP and Senior Research Analyst Rahul Ghosh said.

In its 2016 outlook for non-financial corporates, Moody's said strong domestic growth in India will offset global headwinds.

It, however, added that corporates remain vulnerable to volatility in the rupee against the dollar.

The agency further said lower commodity prices have benefited many Indian corporates, given the country's status as a net importer of raw materials, and its recent history of high inflation.

Moody's changed its outlook for India's banking system to 'stable' from 'negative' in November 2015 because of the gradual improvement in the operating environment for Indian banks.

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