MUMBAI: Some Indian companies could see the quality of their debt decline as higher global borrowing costs and a sharply weaker rupee take their toll, Moody’s Investors Service said.

Companies such as Indian Oil Corp, Tata Steel Ltd. and Tata Power Company Ltd. will remain highly leveraged over the next 12 months because of weak industry dynamics and resulting constraints on cash flows, it said.

“We believe they will be able to refinance their maturing debt, but possibly at higher credit spreads than on existing debt,” the agency said.

But while the rupee has slumped as much as 20 percent this year, it said rated Indian non-financial companies should be able to meet their $32.8 billion in debt coming due through March 2014, more than half of which is denominated in foreign currency, as they will continue to have access to offshore and onshore funding sources.

State-run companies Oil and Natural Gas Corp, Bharat Petroleum Corp. and Indian Oil Corp, and private sector energy conglomerate Reliance Industries Ltd, together account for 60 percent of the total rated corporate debt maturing through next March, it said.

The agency said that as domestic interest rates are also rising most companies will face higher borrowing costs after refinancing of existing debt.

The Indian rupee fell on Thursday, ending five days of gains, as state-run banks likely bought dollars to meet defense needs of the government and as investors booked profit in shares.

Dealers cited central bank intervention to support the rupee as it approached 64 to the dollar.

The rupee has been on a recovery trail helped by recent steps like the passage of the pension bill in parliament and the central bank providing a concessional swap facility to banks to attract overseas deposits from non-resident Indians, which by some estimates can net around $10 billion, helping ease some of the recent despondency about policy making in India.

Foreign buying in Indian equities has continued to remain strong, now adding up to nearly $900 million in five sessions, including provisional data for Wednesday.

Analysts, however, are cautious to already call a turn in fortunes for the rupee.

“We’d be hesitant to say that this denotes a serious sentiment shift for India, and more likely an opportunistic short-term dynamic reflecting buying at (short term) technically oversold levels in EM equities,” said Sacha Tihanyi, senior currency strategist at Scotiabank.

The rupee ended at 63.50/51 to the dollar versus 63.38/39 last close. It rose to 62.92 in the session, its strongest level since Aug. 19.

After favorable trade data, that showed the trade deficit narrowed most in five months, economists awaiting July factory and August retail inflation data to provide cues ahead of the central bank’s policy meeting next week. Wholesale inflation data is due on Monday.

India’s factory output likely shrank for the third straight month in July, while wholesale inflation likely edged up to a six-month high in August.

In the offshore non-deliverable forward PNDF, the one-month contract was at 64.29 while the three-month was at 65.56.

In the currency futures market INRFUTURES, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 63.94 with a total traded volume of $3.4 billion.

Government sources and industry officials told Reuters that India could impose a 10 percent duty on cotton exports aiming to boost overseas sales of value-added textiles to take advantage of a weak rupee and reduce the current account deficit.

India earned about $8.94 billion from cotton exports in 2012/13, equivalent to some 2.92 percent of total goods exports.

India is the second-biggest cotton producer after China and any curb on cotton exports could boost flagging global prices.