Domestic indices wipe out opening gains; trade flat with negative bias

Indian equity benchmarks made positive start on Wednesday, after a day's holiday, tracking overnight gains on Wall Street. But, soon markets wiped-out all the gains and are trading flat with negative bias in early deals on account of selling in Healthcare, Consumer Durables and Consumer discretionary counters. Initially, some support came in as the preliminary trade data released by the commerce ministry showed India’s merchandise exports in April grew 24.2 per cent year-on-year to their third-highest level ever of $38.2 billion on the back of higher commodity prices amid the ongoing Russia-Ukraine war. However, some cautiousness came in as the International Monetary Fund (IMF) said India may only become a $5-trillion economy in FY29. According to data from the IMF's World Economic Outlook Database, updated last month, India's nominal GDP is seen rising to $4.92 trillion in FY28. As such, it will only be in the following year, or FY29, that the GDP will cross the $5-trillion mark.

On the global front, Asian markets are trading mixed in thin holiday trading volumes following the broadly positive cues overnight from Wall Street, as traders are reluctant to make significant moves ahead of an expected Federal Reserve rate hike decision later in the day. Lingering worries also remain about the Covid-19 lockdowns in China and the ongoing war in Ukraine. Financial markets in China, Indonesia, Japan, are closed for public holidays.

Back home, housing finance company stocks were in focus with Icra's report that affordable housing finance companies' (AHFCs) loan book is likely to expand by 17-20 per cent in the current financial year, supported by the government's higher focus on housing and a favourable tax regime. In scrip specific development, Godrej Properties rose as it reported a consolidated net profit of Rs 260.47 crore for March quarter on higher income. The company had posted a net loss of Rs 191.57 crore in the year-ago period. Besides, LIC’s maiden IPO opens for subscription today. The LIC IPO priced in the range of Rs 902 to Rs 949 will be accepting bids till May 09.

The BSE Sensex is currently trading at 56963.99, down by 12.00 points or 0.02% after trading in a range of 56899.91 and 57184.21. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.15%, while Small cap index was up by 0.49%.

The top gaining sectoral indices on the BSE were PSU up by 1.10%, Oil & Gas up by 0.79%, IT up by 0.70%, Energy up by 0.61%, Realty up by 0.57%, while Healthcare down by 1.27%, Consumer Durables down by 1.27%, Consumer discretionary down by 0.42%, Telecom down by 0.24%, Capital Goods down by 0.16% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid Corp up by 2.72%, NTPC up by 1.65%, Infosys up by 1.37%, SBI up by 1.00% and Wipro up by 0.96%. On the flip side, Dr. Reddy's Lab down by 2.24%, Titan Company down by 2.11%, Asian Paints down by 1.80%, Sun Pharma down by 1.75% and Hindustan Unilever down by 1.73% were the top losers.

Meanwhile, SBI research in its latest Ecowrap report has said that the share of incremental bank credit in incremental nominal Gross Domestic Product (GDP) is likely to cross the 50 per cent mark in the current financial year (FY23), from a decade low of 27 per cent in FY2022. The incremental credit to GDP share was as high as 63 per cent in the pre-pandemic year (FY19). The average share was 50 per cent for the seven-year period ended FY20. A higher credit-to-GDP ratio indicates aggressive and active participation of the banking sector in the real economy, while a lower number shows the need for more formal credit.

The report said ‘for FY23, we believe that the share of bank credit may again breach the 50 per cent mark indicating the increasing role of banks in economic growth’. In the fiscal ended 2021-22, banks' credit grew by 9.6 per cent, driven by all major sectors. FY22 ended with an incremental credit growth at Rs 10.5 lakh crore, 1.8 times higher than growth of Rs 5.8 lakh crore in FY21. Segment-wise, the jump in credit to MSMEs and infrastructure was strong at Rs 2.3 lakh crore while credit to housing and the NBFC sector was close to Rs 2 lakh crore. Retail loans expanded by a sharp Rs 3.7 lakh crore, driven by a surge in personal loans apart from housing credit. Credit to agriculture was at Rs 1.3 lakh crore.

As per the report, it seems that the economy was able to shrug off, to a large extent, the aftereffects of the pandemic as credit growth was broad-based across all sectors. It further said that it is now evident that an expansion in public sector bank (PSBs) credit is crowding in credit growth from private sector banks (PVB). Once this trend turns into a self-fulfilling prophecy, the economy stands to benefit. In FY22, the weighted contribution of PSBs in overall credit growth was as much as 43 per cent, which is a steady rise from the lows of 27 per cent in FY19. Simultaneously, the share of PVBs in credit growth has declined from 65 per cent to 47 per cent for the year ended FY22.

The report said even as the outlook of credit growth looks positive in FY23 also, the current inflation trends could play a spoilsport as rate hikes could have a dampening impact on credit demand just as the economy has been turning round the corner. The report said an RBI study indicates that an increase (decrease) in policy rate by 100 basis points causes the credit to decline (increase) by 1.95 per cent with a lag of six quarters. It added ‘our regression results involving credit growth and policy rate (monthly data from January 2009 to April 2020) reveal that an increase (decrease) in policy rate by 100 basis points causes the credit to decline (increase) by less than 1 per cent’.

The CNX Nifty is currently trading at 17064.60, down by 4.50 points or 0.03% after trading in a range of 17039.15 and 17132.85. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Britannia Industries up by 4.43%, ONGC up by 3.01%, Power Grid up by 2.59%, UPL up by 1.81% and NTPC up by 1.62%. On the flip side, Apollo Hospital down by 3.64%, Dr. Reddy's Lab down by 2.62%, Titan Company down by 1.95%, Asian Paints down by 1.91% and Hindustan Unilever down by 1.82% were the top losers.

Asian markets are trading mixed; Straits Times fell 3.61 points or 0.11% to 3,353.29, Hang Seng lost 258.42 points or 1.22% to 20,843.47 and KOSPI declined 6.24 points or 0.23% to 2,674.22, while Taiwan Weighted was up by 39.85 points or 0.24% to 16,538.75.