PSU Banks, IT, realty lead gains as stock market rebounds

At close, the Sensex was up 1,961.32 points or 2.54 percent at 79,117.11, and the Nifty was up 557.35 points or 2.39 percent at 23,907.25.

Ahead of a key state election results, the market recorded a strong rally, with major sectoral indices such as IT, PSU banks, FMCG, energy and realty posting gains of 2–3 percent. The rally, according to experts was broad-based, with stocks like State Bank of India, TCS, ITC, UltraTech Cement, and Titan Company driving the indices.

At close, the Sensex was up 1,961.32 points or 2.54 percent at 79,117.11, and the Nifty was up 557.35 points or 2.39 percent at 23,907.25.

On today's movement, Jay Thakkar, Head of Derivatives and Quant Research, ICICI Securities said, "Today's rally was a combination of two factors: short covering in previously underperforming sectors and continued strength in outperforming ones. About 50 percent of the Nifty, including sectors like IT, Pharma, and Banking, had been relatively resilient in recent weeks, while the remaining 50 percent, including energy, auto, FMCG, and realty, was deeply oversold. Today’s session saw a rebound, resulting in a 500+ point move on the Nifty – one of the largest in the past three to four months."

Thakkar also noted that with the state election outcome on Saturday, markets are pricing in a mix of possibilities. "If the incumbent government secures a strong win, markets could stabilise further, with short covering driving additional gains. However, a loss could trigger a reversal of today’s rally, exacerbating volatility," Thakkar explained.

Sectoral Outperformance

The IT sector stood out as a major gainer in today's session. "IT is firmly positioned in the improving quadrant of the relative rotation graph, indicating strong sectoral momentum," noted Milan Vaishnav, founder of Gemstone Equity Research & Advisory Services. "We expect IT to continue outperforming the broader market, excelling during uptrends and displaying resilience during market declines."

The sector also benefited from macroeconomic tailwinds. "The dollar’s appreciation and the weakening rupee have created a double-positive impact for IT companies," added Thakkar. "Moreover, IT’s revenue dependency on US markets makes it immune to domestic political uncertainties, making it a safe haven for investors in times of volatility."

Key IT heavyweights like HCL Tech, Tech Mahindra, Infosys, and TCS rebounded from lower levels, supported by selective mid-cap IT stocks, which contributed to the sector’s strong performance.

PSU Banks rally on short covering

The PSU Bank index saw a sharp rally, fueled by short covering in stocks such as PNB, SBI, and Bank of Baroda. However, analysts warned of potential volatility. "Today’s movement in PSU Banks is driven by technical factors rather than sustained fundamentals," Vaishnav said adding that Private banks like HDFC Bank and ICICI Bank are expected to remain more resilient and could lead the Bank Nifty’s upside.

Sudeep Shah, Head - Technical & Derivatives Research · SBICAP Securities added that banking stocks like HDFC Bank and ICICI Bank, which have outperformed in recent weeks, are expected to drive the Bank Nifty’s upside.

Outlook for Other Sectors

The auto sector, according to Shah has saw strong gains with stocks like Hero MotoCorp, Eicher Motors, and M&M in a leadership position. "The auto index has significant potential to drive the market next week if Maruti also shows a rebound," said Shah.

The FMCG sector, he noted, which had fallen 18–20 percent in recent weeks, saw minor recoveries. However, he said these gains were a "dead cat bounce" rather than a sustained trend.

Energy and realty sectors also posted gains, with realty showing improved momentum. "Realty is exhibiting signs of sustained relative strength and could perform well over the coming weeks," Vaishnav added.

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