Mumbai, Apr 1 US tariff orders are likely to moderate India Inc's credit profiles in the second half of FY26, and the West Asia conflict, especially its duration, will play a crucial role in determining how it pans out in the future, rating agencies said on Wednesday.
Crisil Ratings, which rates over 7,300 entities, conducted a stress test on the likely impact of the West Asia crisis on Indian companies, which revealed that 23 of the 30 sectors with exposure to the Gulf region will be resilient to the pressure.
Its managing director Subodh Rai told reporters that it is very difficult to predict how long the war will last and what the final outcomes will be.
This is leading the agency to term the credit quality outlook as "stable" for now, on strong balance sheets and domestic demand.
"India Inc's agility and resilience are being tested again after the Covid-19 pandemic and the tariff tantrums. We remain cautious as the duration and intensity of the West Asia conflict are uncertain. If it prolongs, slower global growth, gas availability challenges, higher-for-longer crude oil prices, and consequently impact on consumer sentiment will bear watching," its senior director Somasekhar Vemuri said.
Fiscal and monetary authorities will respond with some relief measures if the crisis goes on for seven to ten more days, but the exact contours are difficult to assess, the agency said, adding that it has not factored in any relief measures while building its outlook.
The credit ratio, or the proportion of rating upgrades to downgrades, moderated to 1.50 per cent, with 383 upgrades to 255 downgrades in H2 FY26, Crisil said. The agency had expected a higher ratio in October, but the US tariffs and their impact on the export-oriented sectors, especially textiles, led to the moderation.
In the event that the war continues for four months, the 23 sectors accounting for 58 per cent of the rated debt can show resilience, Crisil said.
Airlines, speciality chemicals, auto components, diamond polishing, and ceramics can be adversely impacted by the conflict, while upstream petroleum is likely to benefit from the events.
Amid the sharp depreciation in the rupee, the agency said there will not be a major impact because of it as companies either have a natural hedge through trade or have forward cover on their forex exposure.
Its peer India Ratings also said that the impact of the West Asia conflict depends on how long it lasts, and how quickly the supply chains can normalise.
The rating vulnerabilities will be visible in case of borrowers rated BBB, and below, it said.
The agency upgraded 361 ratings in FY26 and downgraded 115, and termed the outlook for FY27 as "cautious".
India Inc will have to grapple with a confluence of risks in FY27, including energy availability, input costs, inflation dynamics, fiscal balances, subdued global trade, and El Nino concerns, it noted.
Energy-intensive segments, such as fertilisers, ceramics, glass, aviation, packaging, and quick service restaurant, face the sharpest near-term pressure from supply disruptions and input cost spikes, while stronger sectors, namely compressed natural gas, oil marketing companies, are better positioned to absorb margin compression, Ind Ra said.
Icra Ratings said it has witnessed 388 upgrades and 124 downgrades in FY26, but underlined that the West Asia conflict is a key monitorable.
Care Ratings said that credit ratio in its universe has slipped to 1.93 times in H2FY26 from 2.56 times in the first half, with 363 upgrades and 188 downgrades between September 2025 to March 2026, suggesting early signs of stress amid a more challenging environment.
It is also cautious on outlook, and pointed out that while domestic consumption, strength of corporate balance sheets act as anchors, global trade uncertainty, energy scarcity and export sector stress are likely to limit any meaningful improvement in credit quality.