Weakness in Large-Cap Stocks Overshadow Broader Market Strength as Indices React to Sectoral Divergence
Indian benchmark indices Sensex and Nifty continued to trade lower on May 16, weighed down by significant declines in IT, pharma, and banking sectors, even as mid- and small-cap stocks posted sharp gains, signaling ongoing divergence between large-cap and broader market sentiment. While foreign institutional investors (FIIs) surprised markets with robust inflows in the previous session, valuation concerns and sectoral underperformance among large-caps capped further gains.
At noon, the BSE Sensex was down 309.81 points or 0.38% at 82,220.93, while the NSE Nifty dropped 85.10 points or 0.34% to 24,977.00. Market breadth remained positive, with 2,218 stocks advancing, 1,180 declining, and 122 unchanged, highlighting continued strength in the broader market.
Highlights:
Sensex fell 0.38%, Nifty dropped 0.34%, both dragged by IT, pharma, and banking stocks.
Broader market outperformed with 2,218 advancing stocks against 1,180 declines.
FIIs delivered Rs 5,393 crore in net equity inflows on May 15, driving a sharp rally in large-caps earlier.
Broader Market Surge Driven by Midcap, Smallcap Resilience and Select Sector Strength
The outperformance in mid- and small-cap segments extended into May 16 as the Nifty Smallcap 100 jumped 1.39% and Nifty Midcap 100 added 0.76%, outshining their large-cap counterparts. Real estate, energy, media, auto, FMCG, and PSU banks were among the key sectoral gainers, reflecting optimism in consumer-facing and infrastructure-linked sectors.
The Nifty Realty index led the sectoral charge with a 1.44% gain, supported by continued optimism over real estate revival and new project launches. Meanwhile, Nifty Energy rose 0.72%, and Media gained 0.57%, amid stock-specific action. Defensive sectors like FMCG (0.31%) and PSU Banks (0.19%) also contributed to market stability.
Conversely, Nifty IT fell 1.02%, as investors pared exposure to export-driven tech names over concerns of margin pressure and slower US demand. Other laggards included Pharma, Metal, Infra, Private Banks, and Bank Nifty, which collectively weighed on benchmark indices. Despite the weakness in some segments, market volatility eased, with the India VIX down 1.72% at 16.60.
Highlights:
Nifty Smallcap 100 rose 1.39%, Midcap 100 up 0.76%, reflecting continued retail and HNI participation.
Nifty Realty led gainers with 1.44% surge, while Nifty IT dropped 1.02%.
India VIX dropped to 16.60, suggesting lower market fear despite index declines.
Defence Sector Rally Extends on Indigenous Manufacturing Push
Defence-related stocks surged for the sixth straight session, as investors continued to price in government commitment to indigenous defence production. Stocks like Cochin Shipyard, Mazagon Dock Shipbuilders, and Bharat Electronics Ltd (BEL) led the gains, with BEL among the top Nifty gainers. The Nifty India Defence index hit a fresh 52-week high, up nearly 20% since May 9, underscoring the sector’s growing prominence in the domestic capex cycle.
The sustained momentum in defence stocks has been fueled by aggressive order inflows, government policy support, and increasing investor confidence in the sector’s long-term growth potential.
Highlights:
Defence stocks surged for sixth session, led by BEL, Cochin Shipyard, Mazagon Dock.
Nifty India Defence index touched new 52-week high, up 20% in just a week.
Sector momentum reflects investor conviction in Make-in-India defence policy.
IndusInd Bank Slides 3% Amid Fresh Accounting Irregularities
Shares of IndusInd Bank tumbled 3% after the bank disclosed two fresh accounting lapses linked to its Microfinance (MFI) portfolio, triggering sharp downgrades by analysts. Brokerages flagged potential earnings estimate cuts for FY25–FY27, citing increased risk and weakened investor confidence. In a regulatory filing, the bank confirmed its Internal Audit Committee is probing the concerns, which could impact future financial disclosures.
This marks a significant reputational setback for the private lender, especially amid heightened investor scrutiny of corporate governance and risk management in financials.
Highlights:
IndusInd Bank down 3%, analysts slash FY25–FY27 earnings estimates.
Two accounting irregularities disclosed; internal audit under way.
Sentiment negative on governance and disclosure issues.
Food Tech Stocks Gain as Zomato, Swiggy Shift Focus to Profitability
Food delivery majors Zomato and Swiggy rallied 3% after announcing changes to their membership plans, reducing benefits for premium users ahead of the monsoon season. The firms introduced a “rain surcharge” even for Swiggy One and Zomato Gold members, who were previously exempt. The move signals an ongoing shift in strategy towards profit-centric operations, likely in response to investor pressure to improve bottom-line performance.
Despite consumer backlash, the market reacted positively, viewing the development as a step toward margin improvement.
Highlights:
Zomato and Swiggy gained 3%, introducing surcharges for premium members.
Strategy reflects focus on profitability, even at cost of consumer perks.
Monsoon season logistics likely factored into pricing strategy.
Technical Indicators Remain Bullish Despite Sectoral Weakness
According to Prabhudas Lilladher, the Nifty has triggered a technical breakout, targeting 25,400 and 25,800 levels, with support now seen near 24,500. The Sensex is targeting 84,000, and support is positioned at the 20DMA of 80,200, which is key for sustaining the current bullish undertone. Analysts believe continued participation from broader markets, combined with foreign inflows, could provide the necessary thrust for new highs.
Top Nifty gainers included Bharat Electronics, NTPC, Eicher Motors, Bajaj Auto, and Adani Enterprises, while Bharti Airtel, IndusInd Bank, Shriram Finance, SBI, and HCL Tech were among the major laggards.
Highlights:
Nifty support at 24,500, upside targets at 25,400 and 25,800.
Sensex aiming for 84,000, with key support at 80,200.
Gainers: BEL, NTPC, Eicher Motors; Laggards: IndusInd Bank, SBI, HCL Tech.
