Key Points

Overall corporate credit quality outlook continues to be resilient and the EBITDA is seen steady at around 12 per cent, said Somasekhar Vemuri, senior director at Crisil Ratings.

The rationalisation of the goods and service tax (GST) rates, income tax relief, lower inflation and reduced interest costs -- are set to bolster domestic consumption. Steadfast government capex and favourable domestic demand support the credit quality outlook for infrastructure -- and consumption-linked sectors, the report states.

"Additionally, balance sheet leverage near decadal lows affords manoeuvrability if global headwinds intensify. While export oriented sectors remain vulnerable to the global macroeconomic headwinds, positive outcomes from trade negotiations, including bilateral agreements with large economies such as the US and the European Union, and further domestic policy support could offset the impact," said Vemuri.

The credit quality outlook of banks and non-banks for this fiscal remains steady. Credit growth is likely to pick up in the second half, aided by lower interest rates, reduction in policy rates and improved consumption driven by rationalisation of the GST rates and income tax cuts. Bank credit is seen growing a touch higher than last fiscal at 11-12 per cent, while assets under management (AUM) of non-banks is expected to grow at a healthy pace like last fiscal's 18 per cent, the report further states.

According to the report, the construction sector will benefit from diversified order books across the roads, water, irrigation and power segments. Strong and predictable cash flows support the outlook for the infrastructure segments such as renewable energy, road assets, commercial real estate and data centres.

Hospitality will benefit from rising momentum in leisure and business travel, with demand outpacing supply.

Similarly, the FMCG sector will benefit from sustained demand, led by easing inflation, tax relief and strong profitability aided by increasing premiumisation.

However, tariffs imposed by the US will weigh on the credit quality of some export-linked sectors given that the country accounts for 20 per cent of India's merchandise exports. In the diamond sector, operating profit will be curtailed as tariff challenges exacerbate demand pressures amid intensifying competition from lab-grown diamonds. Shrimp exporters will also see a decline in revenue amid higher competitive intensity, even as orders got frontloaded in the first half of this fiscal, the report added.

- IANS