219 companies were downgraded in the first half of current year as against 143 in the same period of last year. 

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Care Ratings said, "Downgrades, as a percentage of the total number of cases, has risen from 9% in H1 2015-16 to 12% in H1 2016-17."

The changes or movement in credit ratings of the various entities reflect the improvements, stability and weakness in the financial health of the entities. These changes are captured in the Modified Credit Ratio (MCR) and the movement of the MCR is reflective of the changes in credit quality in the system, a CARE Ratings report said. 

As per the rating agency, highest number of downgrades were recorded in sectors like auto, banks, construction, education, iron & steel, manufacture of apparels, pharmaceuticals, real estate activities, telecom, textiles and transport & storage. 

These sectors witnessed the highest downgrades due to drop in sales & scale of operations, cancellation of projects, moderation in profitability margins, stressed liquidity position, operating losses and stretched working capital position.

However, according to the report, the credit quality of the entities rated by the agency, have been moderated in the first half of the current fiscal as compared with the corresponding period of the previous two years. 

"At the same time, on the whole, the credit quality of the rated entities exhibits sustained stability since H2FY14, prior to which there was a significant deterioration in the same, i.e. from H1FY12 to H1FY14", said the report.

Arun Kumar, Chief General Manager, CARE Ratings, in the report titled 'Credit Quality in H1FY17', said, that the number of reaffirmations and upgrades are increasing reflecting the stability in the credit markets. 

"There has been a moderation in the number of upgrades in H1FY17, 21% lower than that in H1FY16. In terms of share in surveillance cases, 16% of surveillance cases were upgraded in H1FY17, compared with 22% in H1FY16 and 23% in H1FY15", Kumar added.