It said the sovereigns having little policy room to protect growth and buffer themselves from external shocks are likely to be affected the most.

The report titled Sovereigns-Global: Likely Fed Rate Hike Reflects Strength of US Recovery, But Exposes Some EM Sovereigns to Volatile Capital Flows, projected the US Federal Reserve to hike rates by 0.25 percent tomorrow.

However, downside risks will remain for some emerging markets depending on the degree of exposure to rising US interest rates.

The report, however, did not specify the impact, the rate hike will have on India.

"Those possessing limited buffers and policy space will remain most at risk to adverse capital flows and investor sentiment. The big drops in emerging market exchange rates already seen this year were partly in anticipation of a Fed action," Moody's said.

Although lower global commodity prices and possible volatility in capital flows will pose challenges to some emerging markets, a combination of reserve buffers and policy vigilance has the capacity to limit the negative sovereign credit impact.

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