The primary impact of the downgrade in U.S. sovereign rating will be on the availability and cost of funding, both domestic and international, according to credit rating agency CRISIL.

Globally, an increase in risk aversion will reduce appetite for emerging market risk and could affect the ability of Indian companies to raise money externally, the agency said.

Access to equity markets too, is likely to be muted. Volatility in exchange rates are also expected to increase.

“The secondary impact will be on demand. Export growth is likely to slow down and domestic private consumption, which has been strong so far, could moderate as consumers become more cautious”, Ms Roopa Kudva, Managing Director & CEO.

According to Crisil’s assessment companies that will be more vulnerable include those with higher exposure to developed economies, significant un-hedged foreign exchange exposure, higher funding requirements and dependence on refinancing (companies whose foreign currency convertible bonds are due for redemption or that have higher dependence on short term debt).

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