A company's bonds are currently rated 'AA+' by CRISIL. Its profitability drops significantly due to a sector downturn, and CRISIL places it on 'Rating Watch Negative.' What does 'Rating Watch Negative' indicate?

A 'Rating Watch' (also called CreditWatch or Rating under Watch) is placed by a CRA when it identifies a specific event, development, or change in circumstances that could materially affect the issuer's credit quality in the near term and requires prompt review. 'Rating Watch Negative' indicates that the review is likely to result in a downgrade if the identified concern materialises or is confirmed. It is not the same as a downgrade — the current rating (AA+) remains in place while the review is ongoing. The company has a defined window (typically 30-90 days) to resolve the concern, provide information, or face a rating action. If resolved positively, the watch is removed and the rating may be affirmed; if not, a downgrade follows. This is distinct from a 'Negative Outlook,' which signals a possible rating change over a longer horizon (typically 12-24 months) rather than an imminent formal review.