India Inc remains vulnerable to volatile rupee: Moody's

MUMBAI: Most non-financial corporates will benefit from strong domestic growth and accommodative monetary policy, although weak global growth and a potential US rate hike will weigh on businesses, the rating company Moody's said in a report on Wednesday.

Such non-financial companies are rated as Baa3 (positive outlook).

"Healthy 7.5% GDP growth for India for the fiscal year ending March 2017 (FY2017) and a pick-up in manufacturing activity will be broadly supportive of business growth," said Vikas Halan, a Moody's Vice President and Senior Credit Officer.

"However, the corporates remain vulnerable to the volatile Indian rupee as against the US dollar and to low commodity prices," he said.

The fall in commodity prices has benefited many Indian corporates given the country's status as a net importer of raw materials and its recent history of high inflation.

The resultant moderating inflation should result in lower borrowing costs for corporates and yields on corporate bonds, says Moody's.

Refining and marketing companies meanwhile should benefit from healthy margins as demand growth outpaces expected capacity additions.