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Moody's Investors Service in its latest report has said that most rated companies in India can withstand a weaker rupee, although external factors like rising interest rates in developed economies and higher energy prices would increase currency volatility. In a commentary on non-financial companies in India, it said on November 25, the Indian rupee touched 81.67 versus the US dollar, after depreciating almost 10 per cent since the beginning of the year.

According to the report, the weakening rupee is credit negative for Indian companies that generate revenue in the domestic currency but depend on US dollar debt to fund their operations. It said a weaker rupee will also hurt companies with dollar-denominated costs but rupee-based revenues. However, it expects the negative credit implications for rated companies to be limited or temporary.

The report further said most rated companies have protections to limit the effect of currency fluctuations. These include natural hedges, some US dollar revenue and financial hedges, or a combination of these factors, which help limit the adverse effects on cash flow and leverage, even under a more severe deprecation scenario.