The agency, however, affirmed the Baa2 rating. Moody's decision reflects increasing risks that economic growth will remain lower than in the past.
At 10 am, the BSE S&P Sensex was down by 76 points at 40,577 while the Nifty 50 edged lower by 25 points to 11,988. Sectoral indices at the National Stock Exchange were mixed with Nifty pharma down by 0.7 per cent and FMCG by 0.4 per cent.
Among stocks that lost were UPL, Bharti Infratel, Sun Pharma, Tata Steel and GAIL.
However, Yes Bank gained by 2.5 per cent while ICICI Bank and IndusInd Bank ticked up by 1.7 per cent each.
Meanwhile, Asian stocks rallied to near record highs after China said it has agreed with the United States to cancel tariffs in phases.
MSCI's gauge of stocks across the globe rose slightly to stand at 543.70 while Tokyo's Nikkei jumped 0.75 per cent to a 13-month high.