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Stock market recap: After three straight sessions of losses, Indian stock market benchmarks rebounded sharply on Wednesday, 21 May.

The Sensex opened at 81,327.61, and surged over 800 points, or 1%, to an intraday high of 82,021.64. The Nifty 50 began at 24,744.25, also climbing more than 1% to touch 24,946.20. Both indices later pared some gains, with the Sensex ending 410 points, or 0.51%, higher at 81,596.63, and the Nifty 50 closing up 130 points, or 0.52%, at 24,813.45.

Broad-based buying lifted the broader market as well, with the BSE Midcap index rising 0.90% and the Smallcap index gaining 0.51%.

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The Indian stock market witnessed a volatile trading session on Wednesday, 21 May, but ultimately ended on a firm note.

Positive global cues and strong domestic buying had led to a gap-up opening, with the Nifty nearing the psychological 25,000 mark early in the session. However, this level proved to be a strong resistance, triggering sharp intraday selling. Despite the pullback, markets staged a V-shaped recovery in the second half, erasing losses and closing in the green.

The Nifty 50 ended 129.55 points, or 0.52%, higher at 24,801.35, while the BSE Sensex rose 410 points, or 0.51%, to settle at 81,596.63. Bank Nifty also advanced, gaining 197.75 points to close at 55,075.10, reflecting continued momentum in the financial sector.

All sectors ended higher, with the rally led by pharmaceuticals, public sector enterprises, and real estate. The Nifty Pharma index climbed 1.25% amid defensive buying during intraday volatility. The PSE index added 1.21%, buoyed by renewed interest in energy names and value buying in government-owned firms. The realty index rose 1.72%, recovering from early weakness on the back of sustained interest in infrastructure themes.

Among top movers, Bharat Electronics Ltd surged 5.28% on strong institutional interest and robust order inflows. Cipla gained 1.93% on optimism around export performance, while Tata Steel rose 1.86%, extending gains post a strong Q4 and positive sentiment in metals.

On the downside, a few names lagged the broader rally. IndusInd Bank slipped 1.57% amid profit booking after recent gains. JSW Steel fell 1.17% on global commodity concerns, while Kotak Mahindra Bank edged 0.84% lower on institutional selling pressure.

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Despite the volatility, the sharp recovery and broad-based participation underscored the market’s resilience, with key indices holding above crucial technical levels.

After the recent rally, Nifty closed slightly lower at 24,776 on 20 May, forming a small red candle on the daily chart. Despite the mild decline, the index continues to display strength and remains firmly positioned above the key support zone.

The broader trend remains bullish as the index is trading well above its medium-term support levels. The 20-day moving average is at 24,509 and the 40-day DEMA at 24,054 – both comfortably below the current market price, confirming the underlying positive momentum.

On the daily chart, Nifty remains above key moving averages, which suggests that the medium-term trend is intact. The RSI is holding above 63 and the MACD remains in positive territory, reinforcing the bullish bias.

However, on the hourly chart, Nifty has closed below both the 20-hour moving average (24,857) and the 40-hour EMA (24,809), indicating short-term weakness or likely consolidation in the coming sessions. Hourly RSI has dropped below 55 and MACD has given a negative crossover, further confirming a dip in short-term momentum.

Open interest (OI) data shows that the highest call OI is at the 25,000 strike and the highest put OI is at the 24,800 strike. Additionally, there is good call-side build-up at 24,800 and 24,850 and put-side build-up at 24,800 and 24,750, suggesting a tightly packed expiry range. 

The Put-Call Ratio (PCR) stands at 0.76, indicating a mildly bearish to neutral sentiment among market participants. India VIX has risen to 17.54, up by 1%, signalling a possible increase in intraday volatility.

The recent price action is being led by heavyweight stocks such as BEL, Cipla, Tata Steel, and HDFC Life, which have shown relative strength even as the index showed signs of cooling off.

Given the tight OI range between 24,800 and 25,000, combined with short-term bearish signals on the hourly chart, expiry is expected to be range-bound. 

A neutral strategy like an Iron Condor is suitable in such conditions. Traders can consider selling a 24,750 put and 25,000 call while buying a 24,700 put and 25,050 call to limit risk. This strategy benefits if the market stays between 24,750 and 25,000 and volatility remains stable. A decisive break on either side of this range would require quick adjustment or exit.

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While the broader uptrend in Nifty remains intact as long as 24,875 holds, short-term indicators suggest caution. Increased volatility and mixed signals from momentum indicators point to a potential range-bound expiry session.

Traders are advised to keep a close watch on 24,875 for downside protection and 25,000 as the resistance cap. Any breakout beyond this range could shift the short-term sentiment decisively.

Ankush Bajaj is a Sebi-registered research analyst. His registration number is INH000010441.

Investments in securities are subject to market risks. Read all the related documents carefully before investing.

Registration granted by Sebi and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.

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