Moody’s Investors Service on Thursday stated most rated corporations in India have buffers to resist an extra 10-15% depreciation of the rupee.
The rupee depreciated by 8 paise to shut at 77.76 towards the U.S. greenback on Thursday, weighed down by elevated crude oil costs and protracted overseas capital outflows.
In a press release, Moody’s stated the rupee has depreciated round 4.5% because the begin of the 12 months.
Higher vitality costs and rates of interest in developed economies have led to capital outflows and rising commodity costs, pressuring the rupee.
“While these external factors will heighten credit risks associated with currency volatility, most rated companies in India have buffers to withstand a further 10-15% depreciation of the rupee,” Moody’s stated.
The rupee’s depreciation is credit score adverse for corporations that generate income in rupees however rely closely on U.S. greenback debt to fund operations, in addition to for these with important dollar-based prices, equivalent to uncooked supplies and capital spending. However, the adverse credit score implications for rated corporations can be restricted.
“Most rated companies have protections to limit the effect of currency fluctuations. These include natural hedges in the form of revenue and costs denominated in or linked to the U.S. dollar, some U.S. dollar revenue and financial hedges, or a combination of these factors, which help limit the adverse effects on cash flow and leverage, even under a more severe deprecation scenario,” Moody’s stated.
Exporters may benefit as their companies or merchandise change into cheaper and due to this fact extra aggressive within the world market.
However, within the present macroeconomic atmosphere, the profit can be probably restricted amid weak world demand and rising inflation, Moody’s added.
Source: www.thehindu.com
