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The Indian stock market experienced a significant recovery on Wednesday, snapping a three-day losing streak driven by gains in the pharmaceutical and information technology sectors. Both the Nifty and Sensex indices rebounded strongly, reflecting renewed investor confidence after a period of market uncertainty. At 2:40 pm, the Sensex was up 401.57 points, or 0.49 percent, reaching 81,588.01, while the Nifty climbed 130.15 points, or 0.53 percent, to 24,814.05. This resurgence was broad-based, with 1825 shares advancing, 1611 shares declining, and 108 shares remaining unchanged, indicating a positive market sentiment overall. The recovery was primarily fueled by auto, IT, and pharma stocks, which led the market's upward trajectory. Broader markets also participated in the rally, although they underperformed the frontline indices in the second half of the trading session. This suggests that while large-cap stocks were the initial drivers of the recovery, mid- and small-cap stocks also contributed to the positive market sentiment, albeit to a lesser extent. The market rebound came amid a backdrop of global uncertainties and the absence of major domestic triggers. Concerns over volatility in US markets and the potential impact of US-China trade relations on foreign institutional inflows into emerging markets, including India, had weighed on investor sentiment. However, analysts suggested that investors should not overreact to the recent dip and instead wait for clearer signals. While the breach of the 24,800 mark in Nifty had dampened near-term momentum, the short-term trend remained positive as long as the index held above the 24,400 level decisively. This indicates that while there may be short-term fluctuations, the overall outlook for the market remains optimistic, provided key support levels are maintained. Sectoral indices on the NSE traded mostly higher, with realty stocks leading the gains. The Nifty Realty index rose 1.51 percent, followed by Nifty Pharma, which added 1.10 percent, and Nifty IT, which was up 0.70 percent. The auto index also saw decent gains, climbing 0.68 percent. These figures demonstrate the sector-specific drivers of the market recovery, with the realty, pharma, and IT sectors experiencing significant gains. The India VIX jumped 2.53 percent, indicating a rise in market volatility. This suggests that while the market is recovering, there is still a degree of uncertainty and potential for fluctuations. Other sectors like FMCG, infra, energy, and PSU banks posted moderate gains, indicating a broad-based recovery across various sectors of the economy. However, the consumer durables index slipped 0.49 percent, making it the worst performer of the day. This suggests that certain sectors, such as consumer durables, may be facing specific challenges or headwinds that are hindering their performance. The Nifty Bank and Nifty Private Bank indices were flat with marginal upticks, indicating a more cautious approach to the banking sector amid ongoing economic uncertainties.
The broader market, represented by the Midcap 100 and Smallcap 100 indices, rose 0.6 and 0.1 percent, respectively. This indicates that while large-cap stocks were the primary drivers of the initial recovery, mid- and small-cap stocks also participated in the rally, albeit to a lesser extent. According to Ruchit Jain of Motilal Oswal, the midcap segment continues to show strength and is forming a higher high and higher low pattern, which indicates sustained buying interest. This suggests that the midcap segment is exhibiting strong fundamentals and is attracting investor attention. Market breadth has also remained positive in recent days, further reinforcing the strength in broader markets. This indicates that the market recovery is not limited to a few specific stocks or sectors but is rather a widespread phenomenon. It is advisable to be cautious with small-cap stocks with stretched valuations. This suggests that while small-cap stocks may offer opportunities for high returns, they also carry a higher degree of risk and should be approached with caution. Drone makers and defence-related stocks have seen sharp gains since the day Operation Sindoor was launched in retaliation to the Pahalgam terrorist attack. This indicates that geopolitical events and national security concerns can have a significant impact on specific sectors of the stock market. Vinit Sambre, Head of Equities at DSP Mutual Fund, said that the rally in defence stocks is primarily driven by strong orderbook anticipation and fresh order announcements. However, he added that corporate commentary remains muted due to the uncertain macroeconomic environment and that defence execution cycles are typically long. This suggests that while the defence sector is experiencing strong growth, there are also challenges and uncertainties that need to be considered. Noida-based Dixon Technologies Ltd. shares tumbled over 7 percent on Wednesday, May 21, as investors rushed to book profits in the firm's stock following its earnings show for the quarter ended March. The company reported a consolidated net profit of Rs 401 crore for the January-March quarter, a fourfold jump from Rs 95 crore in the same period last year. This sharp rise was mainly due to a one-time gain of Rs 250 crore from selling shares of AIL Dixon Technologies. This demonstrates that even companies with strong financial performance can experience short-term volatility in their stock prices due to investor sentiment and profit-taking.
Pharma shares rallied on May 21 after the US Department of Health and Human Services said it is working to implement an executive order aimed at lowering healthcare costs. The department expects drugmakers to align US prices for brand-name products across markets without generic or biosimilar competition. The statement comes as a relief for biosimilar and generic drugmakers as it talks about price cuts only for branded drugs, indicating that generics will not be affected. This indicates that regulatory changes and government policies can have a significant impact on specific sectors of the stock market, particularly the pharmaceutical industry. According to Sameet Chavan of Angel One, prices are reverting to the short-term moving average mean, with the 20DEMA (currently around 24,400) serving as an important support. This level also coincides with a bullish gap area and the 61.8 percent Fibonacci retracement of the rally from the May 9th swing low. This suggests that technical analysis can be used to identify key support and resistance levels in the market. Immediate support is seen near 24,550. On the upside, the 25000 mark is likely to continue acting as a strong hurdle before the uptrend resumes. On the sectoral front, all major themes ended in the red, with the Nifty Midcap Select Index taking a notable hit. In our view, prices here are retesting previous breakout zones and the 200DSMA, which may keep this space under pressure in the near term. Hence, traders are advised to avoid complacency and remain highly selective in their approach over the coming sessions. This emphasizes the importance of caution and selectivity in investment decisions, particularly in the current market environment. Top gainers on the Nifty included Bharat Electronics, Cipla, Tech Mahindra, HDFC Life, and Sun Pharma. Top losers on the Nifty were IndusInd Bank, JSW Steel, Kotak Mahindra Bank, Coal India, and Grasim. These lists provide a snapshot of the stocks that performed well and poorly on the day, highlighting the sector-specific trends and individual company performance.