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Rating agency ICRA today said it does not expect the pace of rating downgrades to decelerate significantly over the next few quarters.
"Overall, the credit indicators are unlikely to change substantially over the next few quarters as ICRA does not expect a significant reduction in the pace of downgrades," the rating agency said in a statement.
"There could be some increase in pace of upgrades owing to sustainable regularisation of delays by entities whose ratings were adversely impacted due to delays in debt servicing (although such upgrades are likely to remain confined in the non-investment grades) in addition to the company specific factors," it added.
ICRA said the outlook for the performance of corporates also hinges on macro-economic environment, which continues to remain challenging with demand slow down across sectors, cost pressures, tight liquidity positions, and no signs of pick up in investment activity.
The rating agency expects the current account deficit to stay elevated. It also has muted expectations on foreign direct investment (FDI).
"Faced with the current macro-economic scenario, while some highly leveraged entities have begun divesting parts of their assets, which is a credit positive, for many, the debt levels are too high for such divestment to fetch any substantial improvement in their credit profiles," ICRA said.
The inability of these companies to significantly deleverage would impact their liquidity profiles, it added. The rating agency's view remains negative on sectors like metals and mining, construction, power, and capital goods till policy related constraints are addressed and investment cycle picks up.
ICRA, however, said the intensity of downgrades may have peaked in the second half of 2011-12.
On a half-yearly basis, rating downgrades, which had increased sharply during 2011-12, moderated in the second half of last financial year. Rating upgrades, which had witnessed a downward trend till the first half of 2012-13, also improved in the last six months.
ICRA said it expects the downgrade percentages to remain elevated in the short-term.
