Benchmarks end in negative territory on Tuesday

Indian equity benchmarks gave up initial gains and ended in negative territory in the volatile session on Tuesday as traders remained on sidelines ahead of upcoming exit poll results, India’s gross domestic product (GDP) data for Q4FY24 and May F&O expiry. Markets made an optimistic start and managed to keep their heads above water in morning deals, as traders took some support with the India Meteorological Department (IMD) stating that India is likely to receive above average monsoon rains this year, retaining its April forecast. Above average rains will help India, which depends heavily on the summer rains for its farm output, boost agriculture and overall economic growth. Some support also came as a global financial institution revised its GDP forecast for India by 10 basis points to 6.7 percent expecting a sustained growth momentum with additional fiscal space on account of a bumper dividend transfer from the central bank. It also expects the Reserve Bank of India to go for a rate cut in the October-December quarter as it forecast an uptick in core goods inflation due to a rise in manufacturing costs. Additional support also came as S&P Global Market Intelligence stated that the Indian government's capital spending, recovery in private consumption and investment are expected to help carry forward the economic momentum post-elections. 

However, in second half of the trading session, markets oscillated between gains and losses and finally settled in red amid foreign fund outflows. In the domestic market, foreign institutional investors (FIIs) offloaded shares worth Rs 541.22 crore on Monday. Sentiments remained weak amid a private report stating that India's economy likely grew at its slowest pace in a year in the January-March quarter due to weak demand. Some cautiousness also came with domestic rating agency Crisil stating that the banking system's credit growth will drop by 2 percentage points to 14 per cent in financial year 2024-25. The slowdown will be due to lower GDP growth at 6.8 per cent in FY25, as against 7.6 per cent in FY24, RBI measures like higher risk weights on unsecured loans and a high base.

On the global front, European markets were trading lower, while Asian markets settled mostly lower on Tuesday, as traders remained cautious ahead of key inflation readings from the U.S., Europe, Japan and Australia later in the week, which could help traders access the timing and pace of interest rate cuts this year. 

Finally, the BSE Sensex fell 220.05 points or 0.29% to 75,170.45, and the CNX Nifty was down by 44.30 points or 0.19% points to 22,888.15.   

The BSE Sensex touched high and low of 75,585.40 and 75,083.22 respectively. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.63%, while Small cap index was down by 1.09%.

The lone gaining sectoral index on the BSE was Healthcare up by 0.29%, while Realty down by 2.22%, Power down by 1.86%, Utilities down by 1.55%, PSU down by 1.37% and Telecom down by 1.26% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 1.30%, Wipro up by 0.76%, Hindustan Unilever up by 0.37%, JSW Steel up by 0.37% and Bajaj Finserv up by 0.35%. On the flip side, Power Grid Corporation down by 1.64%, NTPC down by 1.16%, Tata Motors down by 1.12%, Tech Mahindra down by 0.97% and Bharti Airtel down by 0.95% were the top losers.

Meanwhile, expressing cautiousness over credit growth of Indian banking system, domestic rating agency Crisil has said that the banking system's credit growth will drop by 2 percentage points to 14 per cent in financial year 2024-25, as compared to 16 per cent growth in bank credit in financial year 2023-24. It said the slowdown can be attributed to lower GDP growth estimation at 6.8 per cent in FY25, as against 7.6 per cent in FY24, RBI measures like higher risk weights on unsecured loans and also a high base.

Admitting that the differential between the deposit and credit growth has reduced over the past year, the agency said slower deposit accretion can keep a check on credit growth. It was quick to add that the fundamental drivers of credit demand are broadly intact and a revival in private corporate capital expenditure (capex), especially towards the second half of fiscal 2025, can provide tailwinds as well. 

It said the corporate segment, which accounts for 45 per cent of the overall loans, is estimated to maintain the growth at 13 per cent in FY25, and added that retail growth will slow down to 16 per cent from 17 per cent in FY24. It said retail will remain the fastest-growing segment for banks, but will feel the drag of lower growth in unsecured consumer credit (25 per cent of retail credit) as banks realign their strategies following the regulatory stipulation of additional 25 percentage points risk weight and strengthen their underwriting processes to counter a potential rise in delinquencies. 

The relatively higher yields in unsecured consumer credit and, hence, the ability to absorb the higher capital charge, will limit the decline in retail growth. Growth in the Micro, Small and Medium Enterprises (MSME) segment (16 per cent of overall credit) is estimated to drop to 15 per cent from 19 per cent in FY24. Agricultural credit growth will remain linked to monsoon trends but should witness a moderation on the back of a strong fiscal 2024.

The CNX Nifty traded in a range of 22,998.55 and 22,858.50. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Divi's Lab up by 3.05%, SBI Life Insurance up by 2.96%, HDFC Life Insurance up by 2.44%, Hero MotoCorp up by 1.99% and Grasim Industries up by 1.86%. On the flip side, Adani Ports & SEZ down by 2.17%, Power Grid Corporation down by 1.64%, BPCL down by 1.59%, Coal India down by 1.53% and Adani Enterprises down by 1.52% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 20.74 points or 0.25% to 8,296.85, France’s CAC fell 45.3 points or 0.56% to 8,087.19 and Germany’s DAX lost 6.89 points or 0.04% to 18,767.82.

Asian markets settled mostly lower on Tuesday on caution ahead of upcoming release of the United States and European inflation data, while market participants are also awaiting speeches from Fed officials for more clarity on the path for Federal Reserve monetary policy. Japanese shares fell as investors anticipated potential policy tightening by the Bank of Japan ahead of its June meeting. While, Japan's service prices rose at the fastest clip in over 30 years in a sign of a broadening inflation trend that boosting the case for gradual increase in interest rates. Chinese shares declined, even as the China's commercial hub Shanghai has lowered down-payment ratios and the minimum mortgage threshold.