Moody's Investors Service says that Indian non-financial corporates that it rates will show modest improvement in their leverage levels, underpinned by revenue and earnings growth.

"The revenue and EBITDA of non-financial corporates that we rate in India should grow 10% and 8%, respectively, for fiscal 2019 (in the fiscal year ending March 2019) from a high base," says Laura Acres, a Moody's Managing Director.

Moody's points out that these companies reported strong financial results for fiscal 2018, with revenue and EBITDA increasing 13% and 12%, respectively.

"Strong demand and production efficiencies will help the companies preserve their profitability against the backdrop of rising commodity prices," says Kaustubh Chaubal, a Moody's Vice President and Senior Credit Officer. "And, aggregate leverage for rated companies will fall modestly in fiscal 2019."

Moody's analysis is contained in its just-released report titled "Non-financial corporates - India: Revenue and earnings growth underpin modest leverage improvement in fiscal 2019," and is authored by Chaubal.

Moody's report says that acquisitions and capital spending financed by debt will cause the debt levels of Moody's-rated companies to rise by 5% in fiscal 2019. Nevertheless, aggregate debt/EBITDA will decline modestly to 2.4x from 2.5x, helped by EBITDA growth.

However, leverage for the telecommunications sector's will remain elevated on relentless competition, which will in turn hurt profitability. Meanwhile, continued capital spending will constrain free cash flow generation in the same industry.

Moody's explains that metals and mining companies are taking on more debt to fund capital spending and acquisitions, prompting a spike in leverage.

As for revenue and EBITDA growth, several factors can limit these levels. In particular, high commodity prices will benefit the metals and mining, and oil and gas sectors, but are negative for end-user industries - such as the auto, chemicals and real-estate sectors - unless they can pass the higher costs to their customers.

Tightening regulations and trade tariffs globally will strain export-oriented sectors such as IT services and auto, but the weakening rupee will somewhat mute this impact.

And, increasing compliance with environmental, social and governance regulation will likely keep business costs high.