CareEdge Ratings’ credit ratio, which measures the ratio of upgrades to downgrades, continued to witness normalisation at 1.67 in H1FY24 in line with our expectations, moderating from 2.72 in H2FY23 and 3.74 in H1FY23. The ratio is now slightly higher than its 10-year average of 1.54. During H1FY24, CareEdge Ratings upgraded the ratings of 217 entities and downgraded the ratings of 130 entities. The credit ratio of the Below Investment Grade (BIG)  portfolio, plunging down from 2.22 in H2FY23 to 1.18 in H1FY24, pulled down the overall credit ratio. While the credit ratio for the Investment Grade (IG)  companies also saw a moderation from 2.99 in H2FY23 to 1.98 in H1FY24, it remained strong, indicating that the investment-grade portfolio has exhibited higher resilience.

Despite facing global challenges such as China’s slow economic recovery and the consequent demand-supply gap, interest rate hikes, volatility in commodity prices and geopolitical uncertainties, India’s economy has exhibited resilience and remained steady. This resilience is evidenced by consistent performance in key high-frequency economic indicators, including robust Goods & Services Tax (GST) collections, steady Electronic Way (E-way) bill generation, a resilient Services Purchasing Managers Index (PMI), and sustained growth in retail credit, all signalling healthy consumer demand.

Sachin Gupta, Executive Director and Chief Rating Officer at CareEdge Ratings, remarked, “During H1FY24, the credit ratio within CareEdge Ratings’ portfolio has stabilised as anticipated, despite the global challenges and lingering uncertainties within the financial systems, which have been dampening global growth. The Indian economy has demonstrated resilience, with GDP registering a robust growth rate of 7.8% in Q1 FY24, up from 6.1% in the previous quarter. This was supported by a favourable base effect, strong growth in the services sector, and continued momentum in manufacturing and construction. However, it is our expectation that GDP growth will moderate in the forthcoming quarters as we witness a base normalisation.”