Moody's upgrade of the outlook on rupee debt rating will likely increase foreign flows, helping the rupee to appreciate, Citigroup said in a note on Tuesday.

Moody's Investors Services on Tuesday raised its outlook on India's local currency rating to positive from stable, citing the country's strong external position and resilience to the global credit crisis.

Citi said it is positive on the external front given probable oil savings and as a return of risk appetite will enhance capital flows.

It also said an expected fiscal consolidation in 2010- 2011 on implementation of goods and services tax, divestment proceeds and the rollback of fiscal stimulus measures would also help.

"These factors could support a further improvement in ratings in the medium term," analysts Rohini Malkani and Anushka Shah wrote.