Updates for morning trade

By Bharath Rajeswaran

May 6 (Reuters) - Indian shares advanced on Wednesday, led by banking stocks after the government approved a credit guarantee scheme to support businesses hit by the Iran war.

Positive reactions to major corporate earnings and a decline in oil prices, driven by hopes of a potential U.S.-Iran peace deal, further supported the gains.

The Nifty 50 .NSEI rose 0.4% at 24,127.90, as of 10:05 a.m. IST, while the BSE Sensex .BSESN added 0.31% to 77,260.52.

Thirteen of the 16 major sectors were trading in the green. The broader small-caps .NIFSMCP100 and mid-caps .NIFMDCP100 rose about 1% each.

Heavyweight banks .NSEBANK, private banks .NIFPVTBNK rose 1% each, while state-owned lenders .NIFTYPSU gained 1.6%.

The uptick comes after the Union Cabinet approved on Tuesday a new emergency credit guarantee programme worth $1.9 billion to support businesses, particularly small firms, facing short-term liquidity stress due to the Iran war.

"The scheme is a net positive for banks, a modest loan growth tailwind and a more meaningful near-term asset quality buffer," said analysts at Nomura.

Brent crude LCOc1 dropped to $108 a barrel from about $115 earlier in the week, lifting global equities after U.S. President Donald Trump said he would pause "Project Freedom", an operation to help escort ships through the Strait of Hormuz, citing "great progress" toward a comprehensive agreement with Iran.

Tehran has not reacted to Trump's comments on the negotiations yet.

"The Iran war may impact earnings in the coming quarters, but only a limited impact is visible in Q4 results so far," said analysts at BofA Securities.

Two-wheeler maker Hero MotoCorp HROM.NS rose 2.6% after it beat March quarter profit estimates, driven by strong domestic demand.

Mahindra & Mahindra MAHM.NS added 3.1%, extending Tuesday's 3.4% gains, after the automaker beat fourth-quarter profit estimates.

Coforge COFO.NS jumped 8.4% after the IT company reported a more than 100% jump in quarterly profit.

Shares in construction major Larsen & Toubro LART.NS fell 3.4% after posting a quarterly profit drop amid the Middle East conflict.