International ratings agency, Moody's has downgraded the local currency rating of Oil and Natural Gas Corporation (ONGC) and GAIL India but pointed out that the outlook for the rating of GAIL and ONGC was stable.

The press note from the company said that ONGC has been downgraded to Baa1 from A2 while GAIL India has been downgraded from A3 to Baa2. The note also said that GAIL's Baa2 rating is now aligned with its foreign currency rating.

The latest downgrade shows that analysts at Moody's believe that ONGC and GAIL are not completely separate from the credit quality of the Indian Government, which is rated as Baa3 with a stable outlook. This is the reason why the ratings are brought more in line with that of the union government.

A part of the report read, "Moody's believes that there has been no deterioration in the intrinsic credit quality of either ONGC or GAIL. Both companies are still viewed as government-related issuers and Moody's continues to assess the expectation of support from the sovereign as strong for GAIL and high for ONGC."

As per the Moody's Rating Implementation Guidance, ONGC and GAIL were affected by the rating of the sovereign government. However, Moody's pointed out that the downgrade does not indicate that the government's risk in increasing as the rating remained the same at Baa3 with a stable outlook.