Nifty tests 24,900, Sensex rallies 800 points as markets shrug off bond rout; IT stocks soar

FIIs offloaded equities worth Rs 5,045 crore on May 22.

After bulls took a beating in the previous session, the benchmark indices Nifty 50 and Sensex opened with gains on for the Friday, May 23 session, as investors shrugged off concerns regarding the widening U.S. fiscal deficit and the sharp-sell off seen in the global bond markets.

At 10:49 am, the Sensex was up 822.92 points or 1.02 percent at 81,774.91, and the Nifty was up 263.95 points or 1.07 percent at 24,873.65. About 1872 shares advanced, 1274 shares declined, and 150 shares unchanged.

The broader markets were mildly lower, with the Nifty Midcap 100 index slipping 0.2 percent, while the smallcap gauge was lower by 40 basis points. Volatility in the markets, as indicated by the India VIX, cooled by 150 basis points, near the 17 mark.

On the sectoral front, a mixed picture was present. Nifty FMCG rallied, with consumer staples giant ITC contributing the most to the rally on its Q4 show, while IT stocks jumped, following Bernstein's bullish recommendation. On the flip side, pharma and healthcare stocks sank, with the Nifty Pharma sinking up to 1.5 percent in trade.

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Global Markets

Overnight, all three Wall Street indices settled nearly flat, amid growing caution related to concerns over spiking Treasury yields and a growing U.S. fiscal deficit. The country's 30-year note hit the highest level since October 2023, after the U.S. House of Representatives passed President Donald Trump's controversial tax and spending bill.

The Dow Jones Industrial Average edged down by 1.35 points, while he S&P 500 was 0.04 percent lower, and the Nasdaq Composite gained around 0.28 percent.

Asian shares were off to a start in the green in a sign of calming US fiscal fears that rocked markets earlier in the week. South Korea's Kospi index ticked upwards by 0.2 percent, while Japan's Nikkei 225 jumped nearly one percent in trade. The Hang Seng index rallied 0.4 percent, while China's Shanghai Composite and CSI 100 indices traded in the green, after reversing morning losses.

Institutional Flows

Foreign institutional investors offloaded equities worth Rs 5,045 crore on May 22, just a day after purchasing over Rs 2,200 crore. In contrast, domestic institutional investors (DIIs) provided some support to the market with net purchases of Rs 3,715 crore, provisional data from the NSE showed.

"It appears that the sustained FII buying which played the important role in this rally has run out of steam. The big FII selling on 20th and 22nd of this month indicates that the FIIs may again turn sellers if the global environment turns unfavourable," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

Technical Levels

Kotak Securities said that the intraday market texture is on the weaker side, but a fresh selloff is possible only after the dismissal of the 24,450 level or below 20-day SMA (Simple Moving Average).

On the higher side, 24,650–24,750 would be the key resistance zones for short term traders. Above this, a pullback rally could extend up to 24,850-24,900. On the downside, if the market falls below 24,450, it could retest levels of 24,380-24,165.

Options Outlook

"In the futures and options space, FPIs continue to stack up short positions, showing no signs of backing down. The index’s repeated failure to reclaim higher resistance bands signals an ongoing bearish undertone. With Nifty now decisively snapping below the 24,800 support, that zone has transformed into a formidable near-term ceiling," said Dhupesh Dhameja, Derivatives Research Analyst, SAMCO Securities.

He added that unless this zone is convincingly reclaimed, the larger trend remains murky and riddled with risk. Any minor uptick could act like a bear trap, encouraging fresh short additions and keeping the sentiment tilted to neutral-to-bearish.

Strategy For Investors

"The silver lining from the market perspective is India’s strong macros particularly the resilient growth and declining inflation and interest rates," Vijayakumar added.

"Even when the market turns weak domestic demand driven segments like financials, telecom, aviation are resilient and this is reflected in the strength in the stock prices of the big boys in these segments like ICICI Bank, Bharti Airtel and Interglobe Aviation. This message from the market is important."

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