Apparently share prices of companies are a good indicator of whether the financials of the firm are in trouble. Bond yields have been a reliable indicator of whether a company’s capacity to repay its debtors has eroded over time. In fact, the bond prices of the subsidiary that was downgraded to default rating showed some resilience even after the downgrade. On the other hand, share prices of the listed subsidiaries have shown early signs of the trouble. To be sure, the RBI notes that not all movements indicate worsening financials and that share prices are volatile.

Source: Mint December 31, 2019 06:00 UTC