CareEdge Global Report Links Market Indicators with Sovereign Credit Risk Assessments
Analysis highlights alignment between market trends and CareEdge Global Ratings' forward-looking sovereign credit framework
CareEdge Global IFSC Limited (CGIL) has published a new analysis indicating that trends in market indicators, including credit default swap (CDS) spreads, support its forward-looking sovereign credit risk assessment methodology.
According to CGIL, its evaluation of changes in key economic indicators, including domestic confidence indices, closely aligns with its internal sovereign credit assessments.
The findings are presented in the report titled "Breaking convention: How CareEdge Global Ratings is redefining global credit risk assessment", published in partnership with the Observer Research Foundation. The report was launched during the BRICS Academic Mid-Term Conference in Dehradun on May 29.
Mehul Pandya, MD and Group CEO at CareEdge, said:
"Within just 18 months of launch (October 2024), we have expanded our coverage to 45 countries, positioning CGIL as the world’s fourth-largest global credit rating agency by coverage of sovereigns. We have observed 22 cases of convergence in rating actions by other global CRAs with our credit risk assessments, corroborating the strength and credibility of our analytical framework. This report details how market behaviour has validated our work."
The analysis covers countries where CGIL assigned higher ratings ahead of other global credit rating agencies (Cohort A), including Portugal, India and Morocco, as well as countries where it assigned lower ratings ahead of peers (Cohort B), including the US, France and China.
According to the report, CDS spreads declined for Cohort A following CGIL's rating assignments, indicating lower market risk perception, while spreads for Cohort B remained broadly stable despite wider market compression.
Nitesh Jain, Chief Rating Officer at CGIL, added:
"Other indicators are also consistent with CGIL’s assessments, with the share of external debt in total government debt increasing, signalling improved market access for Cohort A, while remaining broadly unchanged for Cohort B. Similarly, domestic confidence indicators strengthened for Cohort A in the post-rating period but were muted for Cohort B."
The report states that evolving international markets require a more differentiated approach alongside conventional credit assessment frameworks. According to CGIL, its methodology is based on a forward-looking, back-tested framework that places greater emphasis on objective and measurable parameters.
The report also notes that CGIL is the first Indian credit rating agency to provide global-scale sovereign ratings and aims to offer institutional investors a data-driven framework for sovereign credit assessment.
