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Indian equity benchmarks wiped out all the intra gains and ended marginally lower on Friday dragged by heavy selling in Power, Basic Materials, Utilities and Auto stocks. Market started on a positive note and stayed in green for most part of the day, as sentiments got boost as SBI Research projected the Indian economy to grow at 7.5 per cent in 2022-23, an upward revision of 20 basis points from its earlier estimate. It said ‘given the high inflation and the subsequent upcoming rate hikes, we believe that real GDP will incrementally increase by Rs 11.1 lakh crore in FY23’. Some optimism also came after the commerce ministry said India's merchandise exports rose by 15.46 per cent to $37.29 billion in May on account of healthy performance by sectors like petroleum products, electronic goods and chemicals, even as the trade deficit widened to $23.33 billion during the month. Traders also took note of Food Secretary Sudhanshu Pandey’s statement that retail prices of wheat, rice, sugar and edible oils are showing a declining trend after the measures taken by the government, including curbs on exports of wheat and sugar.

Key gauges maintained their upward momentum in the noon session, after India's dominant services sector expanded at the fastest pace in 11 years in May on strong demand, although inflationary pressures touched new highs, restricting optimism and weighing on consumers' pocketbooks. The S&P Global India Services Purchasing Managers' Index rose to 58.9 in May from 57.9 in April, its highest since April 2011 and comfortably beating the Reuters poll expectation of 57.5. However, key indices trimmed all of their gains to enter into negative terrain as traders got anxious with report stated that as the country's fiscal policy is moving in sync with the monetary policy amid the runaway inflation, the tightening measures along with rising subsidies imply that the consolidated fiscal deficit may remain elevated at 10.2 per cent of GDP in FY23, down 20 bps from FY22.

On the global front, European markets were trading mostly in green as sentiment was underpinned by encouraging German retail sales data. German exports advanced 4.4 percent on a monthly basis in April, in contrast to the 3.0 percent decline posted in March. Investors also await the announcement of the interest rate decision by the European Central Bank (ECB) next week. Asian markets settled mostly higher on Friday amid easing COVID-19 restrictions in China and bets that the Fed might slow its current aggressive pace of rate hikes over the coming months. Investors awaited U.S. farm employment data due later in the day for further clues about how far the Federal Reserve may tighten policy to curb price rises.

Finally, the BSE Sensex fell 48.88 points or 0.09% to 55,769.23 and the CNX Nifty was down by 43.70 points or 0.26% to 16,584.30.  

The BSE Sensex touched high and low of 56,432.65 and 55,719.36, respectively. There were 12 stocks advancing against 18 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 1.45%, while Small cap index was down by 1.16%.

The few gaining sectoral indices on the BSE were IT up by 0.35%, Energy up by 0.28% and TECK up by 0.20%, while Power down by 2.40%, Basic Materials down by 2.31%, Utilities down by 2.21%, Auto down by 1.74%, Consumer Durables down by 1.58% were the losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 2.02%, Infosys up by 0.94%, Larsen & Toubro up by 0.85%, Sun Pharma up by 0.63% and TCS up by 0.46%. On the flip side, Ultratech Cement down by 5.49%, Maruti Suzuki down by 2.71%, NTPC down by 2.51%, Axis Bank down by 2.18% and Bajaj Finserv down by 2.09% were the top losers. 

Meanwhile, SBI Research in its latest report has projected the Indian economy to grow at 7.5 per cent in 2022-23, an upward revision of 20 basis points from its earlier estimate. SBI chief economist Soumyakanti Ghosh said ‘Given the high inflation and the subsequent upcoming rate hikes, we believe that real GDP will incrementally increase by Rs 11.1 lakh crore in FY23. This still translates into a real GDP growth of 7.5 per cent for FY23, up by 20 basis points over our previous forecast’. As per the government data, the economy grew by 8.7 per cent in FY22, net adding Rs 11.8 lakh crore in the year to Rs 147 lakh crore, the report said, adding this was however only 1.5 per cent higher than the pre-pandemic year of FY20.

Ghosh said nominal GDP expanded by Rs 38.6 lakh crore to Rs 237 lakh crore, or 19.5 per cent annualised. In FY23 also, as inflation remains elevated in the first half, nominal GDP will grow 16.1 per cent to Rs 275 lakh crore. The report basis its optimism on the rising corporate revenue and profit and the growing bank credit coupled with ample liquidity in the system. On rising corporate growth, the report noted that in FY22, around 2,000 listed companies reported 29 per cent top line growth and 52 per cent jump in net profit over the previous year. Construction sectors including cement, steel, etc reported impressive growth in both revenue as well as net income with 45 per cent and 53 per cent, rise respectively in revenue.

Interestingly, the order book position remains strong, with construction major L&T reporting 9 per cent growth in order book position at Rs 3.6 lakh crore as of March, supported by 10 per cent growth in order inflow of Rs 1.9 lakh crore in FY22 and Rs 1.7 lakh crore in FY21. Similarly, the sector-wise data for April indicates that credit offtake has happened in almost all sectors led by personal loans registering 14.7 per cent demand spike in April and contributing around 90 per cent of the incremental credit in the month, primarily driven by housing, auto and other personal loans as customers, expecting interest rate hikes, have been front-loading their purchases.

On the liquidity front, the report expects the central bank to be supportive of growth by only gradually hiking repo rates, but mostly frontload it in June and August with a 50 basis points repo hike and 25 basis points CRR (cash reserve ratio) hike in the forthcoming June policy. Core systemwide liquidity declined from Rs 8.3 lakh crore in the beginning of the year to Rs 6.8 lakh crore now while net LAF (liquidity adjustment facility) absorption declined from Rs 7.5 lakh crore to Rs 3.3 lakh crore.

The CNX Nifty traded in a range of 16,793.85 and 16,567.90. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Reliance Industries up by 1.97%, Infosys up by 0.98%, Larsen & Toubro up by 0.79%, Sun Pharma up by 0.68% and HCL Technologies up by 0.67%. On the flip side, Grasim Industries down by 6.53%, Ultratech Cement down by 5.50%, Shree Cement down by 4.64%, Hero MotoCorp down by 3.05% and Maruti Suzuki down by 2.79% were the top losers.

European markets were trading mostly in green; France’s CAC increased 6.60 points or 0.1% to 6,507.04 and Germany’s DAX increased 36.80 points or 0.25% to 14,521.97.

Asian markets settled mostly higher on Friday, tracking gains in Wall Street overnight with bets that the US central bank would slow its current aggressive pace of interest rate hikes ahead to avoid tipping the US economy into a recession. Further, easing of Covid-19 restrictions in China also supported market sentiments. Japanese shares gained ahead to the release of US jobs data for May and slew of domestic economic data next week. Meanwhile, Japan and the US signed a revision on the beef safeguard mechanism under the US-Japan Trade Agreement. South Korean shares rebounded, supported by the Organization of the Petroleum Exporting Countries' decision to pump more crude oil over the next two months that helped ease inflation concerns. Markets in mainland China, Hong Kong and Taiwan were closed for the Dragon Boat Festival holiday.

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