Moody’s Investors Service on Thursday said its outlook for Indian corporates (non-financial) is negative, reflecting macro-economic challenges over the next 12 months.
It also expects the rupee to remain volatile due to heightened expectations of a scale-back of quantitative easing by the US Federal Reserve in 2014.
This could make the operating environment more challenging for importers and exporters, said Moody’s in a just-released report, titled
Vikas Halan, Moody’s Vice-President and Senior Analyst in Singapore, who has authored the report, highlights that companies will face higher borrowing costs and tight funding conditions with monetary policy likely to remain tight.
India’s economic growth is expected to remain weak as general elections will delay the reforms needed to revive the economy, the report said..
Moody’s could move to a ‘stable’ outlook if its GDP growth expectations exceed 6 per cent, the rupee stabilises and a development and reform-focused government is formed with a strong majority.
SECTORAL OUTLOOK The weaker rupee has improved competitiveness for the IT/business process outsourcing sector, where its sector outlook is stable.
Moody’s outlook is negative for the steel, metals and mining sectors, where it expects the weak economy and capacity expansions to weigh on margins and utilisation rates.
It also has a negative outlook for the automotive sector, as it expects demand to remain weak.
Moody’s expects Indian exploration and production companies to continue their acquisition spree to secure the country’s energy needs.
It also sees substantial headroom under their current ratings for further buys.
A near doubling of gas prices from April 2014 will lift upstream revenues with ONGC seeing the largest boost, the report said. However, the fuel subsidy burden on upstream companies may remain high, despite an expected decline in total fuel subsidies. Moody's outlook for the sector is stable.