The first half of the current financial year (H1 FY26) has painted a fascinating picture of India's corporate landscape. Despite a global environment marked by geopolitical tensions, some domestic demand slowdowns, and rising retail credit delinquencies, Indian corporates demonstrated remarkable resilience. A host of domestic factors—including near-decade low inflation, a significant 100 basis points interest rate cut, above-normal monsoons, and consumption-boosting policy measures like lower income tax and reduced GST—acted as strong tailwinds, helping maintain robust credit quality for many businesses, according to leading credit rating agencies. This strong domestic footing has proven to be a crucial 'economic moat' safeguarding India Inc.
While overall resilience was the theme, H1 FY26 saw distinct winners and challengers. The clear stars were infrastructure and related sectors. Construction, engineering, roads, renewables, capital goods, and secondary steel sectors saw the most credit upgrades, benefiting from government impetus and predictable cash flows. Beyond infrastructure, sectors like commercial realty, auto & auto components, consumer services (such as education, hospitality, and healthcare), and consumer durables also experienced upgrades, driven by sustained domestic demand and an improving economic environment. It's evident that India's domestic consumption story and strategic infrastructure push are powering significant growth.
However, not all sectors shared the same upward trajectory. Export-linked industries, including diamond polishers, shrimp exporters, and home textile manufacturers, faced considerable headwinds, primarily due to the imposition of high tariffs by the US. These sectors bore the brunt of a more complex global trade environment, highlighting the vulnerability of businesses heavily reliant on international markets. The outlook for the second half of FY26 continues this divergence: infrastructure, hospitality, and FMCG are expected to sustain positive momentum, while export-oriented sectors are likely to grapple with ongoing challenges from global trade policies.
