The credit quality of rated Indian non-financial corporates is expected to deteriorate as the coronavirus outbreak along with a slowing economy dampens consumer confidence and business activity, Moody's Investors Service said on Friday.

"The economic slowdown is exacerbating existing challenges particularly in sectors vulnerable to declining consumption and resource price volatility, such as in the automotive, oil & gas, mining and steel sectors," Moody's Vice President and Senior Credit Officer Kaustubh Chaubal was quoted as saying in a statement.

In terms of slowdown, India's GDP has contracted by 24 per cent a year-on-year basis for three months to June 2020, the sharpest decline among major economies.

The country is expected to post its first full-year contraction in 40 years during the fiscal year ending March 2021.

According to Abhinav Mishra, a Moody's Associate Analyst and co-author of the report: "Aggregate EBITDA for the 22 rated companies will fall 24 per cent and debt or EBITDA leverage will increase to around 4.0x in fiscal 2021."

Even with the expectation of recovery gathering pace from the third quarter of fiscal 2021, aggregate revenue in fiscal 2022 will still continue to be 7 per cent short of the level in fiscal 2020, before the Covid-19 pandemic.

"Moody's expects unit sales of passenger and commercial vehicles to fall 20 per cent in fiscal 2021 from a year ago, while low oil and gas prices, weak refining margins and reduced demand for transport will weigh on oil & gas companies," the statement said.

"Volatile commodity prices and elevated debt levels will constrain a meaningful improvement in credit metrics for miners and steelmakers.

Conversely, credit trends for IT services and telecommunications companies remain neutral.

"Despite the challenges, refinancing risk remains manageable for most companies, supported by their good relationships with banks and track record of access to capital markets," the statement said..