More companies have ratings upgrades in 2010: Fitch Ratings

MUMBAI: In what is indicative of the improved economic situation, Fitch Ratings today said 2010 saw companies getting upgrades exceeding those with downgrades for the first time since 2006.

Nearly 12 per cent of outstanding ratings were upgraded in 2010 as against 5.3 per cent downgrades, Fitch said, while upwardly forecasting its GDP growth for FY11 to 8.7 per cent from the earlier 8.5 per cent announced earlier.

The data, however, excludes structured finance transactions, Fitch said in a release here.

The economy had grown an average of over 9 per cent for three years prior to the onset of the global recession in September 2008 with the fall of Lehman Brothers. In FY09 and FY10, GDP showed resilience courtesy domestic demand and GDP grew at 6.3 per cent and 7.4 per cent, respectively.

Commenting on how the situation has panned out, Fitch said the upgrades first started moving up in Q2 of 2009 and by the year-end, they were at par with the downgrades. "It was from the beginning of 2010 that upgrades exceeded downgrades on a quarterly basis."

Though the economy grew 8.9 per cent in the first half of this fiscal, the rising food inflation and commodity prices are concerns and economists are worried about GDP maintaining the H1 robustness in H2. The Government has already revised upwards its forecast to over 9 per cent this fiscal.

Fitch said it expects RBI to continue tightening its policy "in the coming quarters" to deal with inflationary pressures. It is widely expected that RBI, slated to announce its third quarterly review of the monetary policy on January 25, will tighten its policy stance. It has increased key rates - repo and reverse repo -- six times in 2010.