Over Rs 1.6 trillion debt downgraded by credit rating agencies in August

Credit risks have continued to weigh on the debt markets, with debt programmes worth Rs 1.64 trillion being downgraded in August. So far in FY20, Rs 10 trillion worth of debt has been downgraded

According to fund managers, the rise in the number of companies where rating agencies have withdrawn or suspended ratings is concerning. Credit ratings for 135 debt issuances were suspended or withdrawn in August, according to data from the Securities and Exchange Board of India. 

This was the highest number in this fiscal. The value of issuances that have lost credit ratings stood at Rs 66,120 crore in August, taking the tally to Rs 1.6 trillion for this financial year. Sharp downgrades can adversely impact the returns of investors exposed to debt schemes which make large allocation to risk-assets, said a fund manager. 

For instance, credit-risk funds have had to bear the brunt of the downgrade cycle, with the category delivering less than one per cent returns in a period of one year.