Sensex, Nifty Slip as IT Stocks Weigh Down Market; Midcap and Smallcap Indices Outperform

The Indian stock market witnessed mixed sentiment on May 16, with benchmark indices Sensex and Nifty continuing to trade lower, primarily due to a steep selloff in IT, pharma, and banking stocks. However, the broader market remained strong, as midcap and smallcap indices surged nearly 2%, signaling ongoing investor confidence in select pockets.

At midday, the Sensex was down by 309.81 points, or 0.38%, settling at 82,220.93, while the Nifty dropped 85.10 points, or 0.34%, to trade at 24,977.00. Despite the decline in headline indices, market breadth leaned positive with 2,218 stocks advancing, compared to 1,180 declining, and 122 remaining unchanged.

IT, Pharma & Banking Stocks Drag Market Lower

The weakness in benchmark indices was largely driven by a sharp selloff in IT, pharma, and banking stocks. These sectors, which carry significant weight in the Nifty and Sensex, pulled down the overall sentiment as investors opted for profit booking after recent rallies.

Midcaps and Smallcaps Shine Amid Largecap Weakness

While largecap stocks came under pressure, midcap and smallcap indices showed impressive strength, rallying nearly 2%. This performance highlights continued investor interest in broader market opportunities, especially in sectors and companies less affected by global headwinds.

“Momentum is now tilting towards largecaps, but mid- and smallcaps remain strong,” experts noted, pointing to a shift in market dynamics.

Foreign Inflows Surprise Markets

Despite concerns that foreign institutional investors (FIIs) might reduce exposure to Indian markets in favour of cheaper Chinese stocks—especially amid progress in the US-China trade dialogue—investors were surprised by the return of strong foreign buying worth ₹5,393 crore in the previous session.

“The unexpected inflow triggered a wave of short covering in largecaps, powering a sharp rally,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

He further noted that if foreign inflows continue, the market may resume its upward trajectory. However, he also cautioned that rising valuations could start to weigh on fundamentals, potentially slowing down the pace of gains.

Looking Ahead

As volatility continues and global cues remain mixed, market watchers are closely tracking foreign investor activity, corporate earnings, and sector-specific performance. The resilience in midcaps and smallcaps provides a silver lining amid weakness in the frontline indices.

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