Health of India Inc. Worsening ::Trust Group Rates and Credit Research

This is our 2nd year of covering the Z-Score Watch for India Inc. We plan on continuing to release the Z-Score Watch on a half yearly basis.
From Sep-11 to Mar-12, we noted the following key changes:
The average Z-Score for BSE-500 companies decreased by 6%
The % of Distressed companies (19.2%) crossed the Mar-09 peak (18.6%)
Z-Scores of high Capex, high debt sectors, Power/ Discom, Real Estate, Steel & Iron continued to decline
Z-Scores of previously resilient sectors like Oil & Gas, Healthcare and Services also declined
Z-Scores of low debt sectors like Technology and Consumer Staples continued to improved
Z-Scores of the high debt Telecom sector also improved
Z-Scores are positively correlated with Ratings (Ratings Actions Ratio) and as noted in our last report, they are a leading indicator of the credit quality of India Inc. Z-Scores predict the reversal in upgrade/ downgrade cycle approximately 6 months in advance of any other indicator.
Z-Scores are also positively correlated with Credit Spreads; they together with the Z-Scores show a deterioration in the Health of India Inc.
Deterioration in the Z-Score of a company implies a greater probability of default on and/ or a need to restructure its financial obligation.

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