Moody's Ratings on Monday said elevated energy prices will weigh on the near-term credit conditions of Indian corporates, despite robust balance sheets and favourable long-term growth prospects.
Stating that Indian corporates are currently in a better financial position to absorb external shocks, supported by deleveraging, healthy liquidity and supportive policy frameworks, Moody's said persistently high energy prices and structural shifts in key service industries could test credit strength over the coming quarters.
"Elevated energy prices weigh on near-term credit conditions for Indian corporates, despite strong fundamentals," it said in a statement.
The conflict in West Asia will weigh on near-term earnings and cash flows for energy-intensive and fuel-dependent sectors, it added.
"India's heavy reliance on imported crude oil, liquefied natural gas and certain petroleum products exposes corporates to higher input costs, currency volatility and supply chain disruptions.
"State-owned oil marketing companies and downstream fuel retailers face acute margin pressure as elevated costs are only partially passed through to consumers, while fuel-intensive sectors such as cement, chemicals, fertilisers and aviation are seeing rising cost burdens," Moody's Ratings Managing Director Vikash Halan said.
Moody's Ratings India affiliate ICRA expects the operating environment for corporate India in FY2026-27 to be shaped by heightened geopolitical risks, particularly the ongoing tensions in the Middle East and evolving trade tariff developments with the US.
Against this backdrop, ICRA has revised the outlook to negative for aviation, fertilisers, and the refining and marketing segment within oil and gas.
Noting that not all sectors face headwinds, ICRA said that sustained improvement in order books has driven a positive outlook for capital goods and defence, while healthcare maintains a favourable position as demand for medical treatments and preventive services continues to rise.
Weather-related risks present an additional layer of uncertainty. El Niño-like conditions could disrupt monsoon distribution, weighing on rural incomes and discretionary spending, it added.
"While government support measures and minimum support price interventions could partially mitigate income risks, a weaker agricultural outcome could temper rural discretionary consumption.
"Accordingly, there could be downward pressure on demand in sectors like tractors, two-wheelers, FMCGs and construction materials linked to rural housing," ICRA, EVP and Chief Ratings Officer, K Ravichandran said.
Published on May 25, 2026