A spate of credit events hitting top rated issuers has put investors in a fix. Credit rating agencies have missed impending defaults in several companies including IL&FS, DHFL and Zee group, leading to sharp downgrades in ratings of instruments that were of supposedly high credit quality.
This has raised concerns about the utility of credit ratings, which often form the basis for investments by mutual funds and insurance companies. Are ratings not reflecting the actual financial position of the companies? How should investors interpret ratings in this scenario?
