Markets snap 3-day losing streak: Sensex rises 400 pts, Nifty above 24,800 as pharma, IT stocks surge

Top gainers on the Nifty included Bharat Electronics, Cipla, Tata Steel, Bajaj Finserv, and HDFC Life.

Benchmark indices Nifty and Sensex staged a smart rebound on Wednesday, May 21 to snap a three-day losing streak as auto, IT, and pharma stocks led the recovery. Broader markets also ended higher, though they underperformed the frontline indices in the second half of the session.

At close, the Sensex was up 410.19 points or 0.51 percent at 81,596.63, and the Nifty was up 129.55 points or 0.52 percent at 24,813.45. About 2214 shares advanced, 1615 shares declined, and 126 shares remained unchanged.

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"There's an absence of any major domestic triggers amid global uncertainties. Intermediate volatility in the US markets and concerns over the potential impact of the US-China trade deal on foreign institutional inflows into emerging markets, including India, can weigh on sentiment yesterday," said Ajit Mishra, Senior Vice President of Religare Broking.

"That said, we believe investors should not overreact to the recent dip and instead wait for clearer signals. While the breach of the 24,800 mark in Nifty has dampened near-term momentum, the short-term trend remains positive as long as the index holds above the 24,400 level decisively," he added.

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. Auto index also saw decent gains, climbing 0.68 percent. The India VIX jumped 2.53 percent, indicating a rise in market volatility. Other sectors like FMCG, infra, energy, and PSU banks posted moderate gains. However, the consumer durables index slipped 0.49 percent, making it the worst performer of the day. The Nifty Bank and Nifty Private Bank indices were flat with marginal upticks.

The broader market, represented by the Midcap 100 and Smallcap 100 indices, rose 0.8 and 0.4 percent, respectively. Ruchit Jain of Motilal Oswal said the midcap segment continues to show strength and is forming a higher high and higher low pattern, which indicates sustained buying interest. Market breadth has also remained positive in recent days, further reinforcing the strength in broader markets. It is advisable to be cautious with small-cap stocks with stretched valuations.

Drone makers and defence-related stocks have seen sharp gains since the day Operation Sindoor was launched in retaliation to the Pahalgam terrorist attack. Vinit Sambre, Head of Equities at DSP Mutual Fund, said during a conversation on CNBC-TV18 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.

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.

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.

"We believe 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. Before that, immediate support is seen near 24,550," Sameet Chavan of Angel One said.

"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," he added.

Top gainers on the Nifty included Bharat Electronics, Cipla, Tata Steel, Bajaj Finserv, and HDFC Life. Top losers on the Nifty were IndusInd Bank, JSW Steel, Kotak Mahindra Bank, Coal India, and Grasim.