The recent slew of government's policy reforms may not be able to stop ratings agency Standard & Poor's (S&P) from announcing further downgrading India's rating.

S&P has warned that it could slash India's rating if the country continued to face dim economic growth prospects, deteriorating external position, slow down in fiscal reforms and worsening political conditions.

Last month, the Union Government of India opened multi-retail and aviation sectors to foreign investors. It also raised foreign direct investment (FDI) cap in insurance and pension sectors. The policy reforms aim at proving a big boost to the economy. But, te moves have yet to show results.

All eyes are currently on beleaguered carrier Kingfisher Airlines and struggling software giant Infosys. Markets will become under more intense pressure if Infosys fails to report an impressive revenue growth, and if Kingfisher fails to end the ongoing lockout soon.

If S&P downgrades India's rating further, government-owned lenders like State Bank of India (SBI) would come under pressure.

On Wednesday, S&P slashed Spain's sovereign credit rating by two notches to triple-B minus. The rating agency said Spain's deepening economic recession and the government's inability to arrest the decline forced it to downgrade the European country's rating.

Spanish debt downgrade and increasing pessimism over U. S. earnings dragged European, American as well as Asian markets down on Thursday morning. Hong Kong's Hang Seng was trading down 0.1 per cent, while Japan's Nikkei Stock Average was off 0.5 per cent.