CARE Ratings has constructed an index, the Debt Quality Index, which “captures, on a scale of 100 (index value for the base year FY12), whether the quality of debt is improving or declining. Intuitively an upward movement indicates improvement in quality of debt benchmarked against the base year. As it is contemporary with minimum time lags, the health of the debt and credit markets is encapsulated on a near real-time basis”.
The data set comprises 1,582 companies from CARE’s portfolio of 2,980 companies on March 2012.
The chart shows this index has been deteriorating steadily this fiscal year and the decline has been rather sharp since September.
The conclusion: the bottom has not yet been reached as far as the deteriorating quality of debt is concerned.