Credit rating stocks CRISIL, CARE rally 6% in Wednesday's trade; here's why

Business Standard

a day ago

Share price movement of credit ratings companies
Shares of listed credit ratings companies CRISIL and CARE Ratings rallied 6 per cent on the BSE in Wednesday's intra-day trade on a healthy business outlook.
Share price of CARE Ratings hit a record high of ₹1,946, as they surged 6 per cent on the BSE in intra-day trade. CRISIL's share price also soared 6 per cent to ₹5,849.40 in intra-day trade. In the past one month, the stock price of CARE Ratings and CRISIL have zoomed by 51 per cent and 20 per cent, respectively. Meanwhile, ICRA was up 1.5 per cent at ₹6,695.10 in intra-day trade today, and has rallied 17 per cent in the past one month.
What's driving the rally in credit ratings stocks?
Analysts remains positive on Domestic Ratings business and expects bond issuances to increase over coming quarters aided by monetary easing and softening corporate spreads. Structural growth drivers of strong competitive position and premium pricing stay unaffected.
Meanwhile, Banking, Financial Services, and Insurance (BFSI) sector post Reserve Bank of India (RBI) meeting is in limelight, as reversal in interest rate cycle to boost credit off-take, thereby easing of liquidity to aid margin trend which will support return ratios.
While prudently balancing fiscal consolidation and growth objectives, the Union Budget for FY26 has announced several measures under four engines of growth – agriculture, MSMEs, investment and exports. The tax cuts on individuals as announced in the Union Budget for FY26 are set to increase disposable income, boosting consumer spending and improving their loan eligibility which is expected to drive demand for credit.
In FY25, the Indian economy faced multiple headwinds, including slowing global growth, weakness in external demand, and a volatile global environment. Investment activity was dampened by a slowdown in public capex, resulting in a moderation of gross fixed capital formation growth to 6.1 per cent in FY25 from 8.8 per cent in FY24.
Bank credit growth to large industries and the services sector combined, moderated to 10.1 per cent as of March 2025, compared to 16.7 per cent a year earlier. The slowdown in credit to services can largely be attributed to the increased risk weightage for non banking finance companies (NBFCs). The restoration of risk weights on bank exposure to NBFCs is expected to support credit growth going forward, according to CARE Ratings.
Looking ahead, GDP growth is projected to moderate further to 6.2 per cent in FY26. Key headwinds for the Indian economy stem from continued uncertainties around global trade policies and their impact on global growth. Nonetheless, moderation in inflation, prospects of a normal monsoon, and lower interest rates are expected to support the Indian economy in the coming year, the rating agency said.
Though ongoing global uncertainty could retain pressure on discretionary spends of large global banks in the near term, CRISIL has started witnessing some traction in business discussion with customers. Management revealed that global banks continue to invest in transformation initiatives (across cloud, data & analytics, AI/ML and automation) and there is demand for cost effective solutions from asset managers.
CRISIL has pivoted its strategy on growth areas and opportunities in Global research and Risk Solutions (GR&RS) business and has made investments in sales, capabilities, and offerings for building the revenue pipeline. If macro uncertainty recedes and discretionary spends improve, then it should accelerate the growth momentum being built by CRISIL. In Global Benchmarking Analytics (GBA) business, the growth is being driven by regional banks, asset managers and other identified opportunities.
Analysts at YES Securities expect a meaningful improvement in revenue growth of CRISIL through CY25/26, aided by gradual growth turnaround in GR&RS and sustained momentum in other businesses. While rising share of Domestic Ratings revenue would be margin accretive, there are margin levers in each business (operating leverage, pricing, efficiency, value addition, etc.) with no significant challenges on cost/people front at this point.