Fitch Ratings expects most companies to manage the impact of second wave of COVID-19, thanks to their strong market positions, adequate balance sheets and liquidity, diversified operations, and flexibility to adjust costs and key business drivers.

For smaller companies, which may face liquidity crunch amid the restrictions, Fitch believes that the liquidity measures announced by the RBI will provide some relief. Besides, RBI's decision to classify funding by small finance banks to smaller microfinance institutions for on-lending as priority-sector lending, will also favour smaller firms, Fitch said. The rating agency sees weak domestic demand as a key risk to the businesses, but also believes that the second wave will have a less severe impact on companies compared to 2020.

The hospitality and non-food retail segment will likely witness a significant impact on demand owing to COVID restrictions, whereas technology and telecom companies are the least likely to see weaker demand, the ratings agency said. For refining companies, Fitch expects strong refining and marketing margins to aid their profitability amid falling demand for diesel and petrol. Besides, companies in steel, chemicals and pharmaceutical segments will be favoured by an improvement in global demand, Fitch said.

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