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Stock market today: Indian stock market staged a strong recovery in Friday's session, May 22, recouping all the losses from Thursday's crash, largely led by technology and consumer goods stocks. Earnings optimism and easing U.S. Treasury yields helped bulls take charge across Dalal Street.

The Sensex gained 769 points, or 0.95%, to end the session at 81,721 points, while the Nifty 50 soared 243 points, or 1%, to climb back above 24,800 and settle at 24,853 points. Despite the strong recovery in the indices, both ended the week with cuts of over 0.65%.

The broader market also staged a strong recovery in Friday’s session, with the Nifty Midcap 100 surging 0.67% and the Nifty Smallcap 100 index rising even higher by 0.80%, closing at 17,643 points.

Among individual stocks, over 100 Nifty 500 stocks closed the session in green, with Anil Ambani group stocks emerging as the top performers. Reliance Power gained 16.4%, while other group stocks, including Reliance Infrastructure and Reliance Home Finance, ended the session with gains of up to 10%.

Despite the lack of fresh triggers to sustain bullish momentum in the Indian stock market at this juncture, it appears that the market is following a 'sell-on-rise and buy-on-dips' trend.

The domestic equity market has been swinging between gains and losses. This lack of clear direction reflects the underlying uncertainty surrounding key global developments, including the progress of US-India trade negotiations, concerns about the US fiscal position, and fluctuations in currency markets.

The intermittent rise in the market can be attributed to short covering, as investors continue to see value due to prospects of healthy economic growth, an earnings revival, interest rate cuts, and a normal monsoon.

"At present, market momentum is largely driven by liquidity rather than fundamentals. Greater clarity is expected to emerge after the first and second quarters of the current financial year. By September, we may see a more defined trend as macroeconomic indicators and corporate earnings provide direction," said Avinash Gorakshakar, the head of research at Profitmart Securities.

Another factor that could be behind the market's gain is the weakness in the US dollar. The dollar index has declined by over 1 per cent this week, looking set to suffer its worst weekly loss since April 7. A weaker dollar can encourage greater foreign capital inflows to emerging markets like India.

Despite the near-term volatility, the medium to long-term outlook of the Indian stock market remains healthy, reflecting India’s macroeconomic stability amid global uncertainty and the strong influx of retail investors. This bright outlook encourages investors to accumulate quality stocks during market corrections.

According to global financial giant Morgan Stanley, the correction in the Indian stock market presents a compelling opportunity to invest in the country's long-term growth story.

In its latest outlook, Morgan Stanley has set a base-case Sensex target of 89,000 by June 2026, assigning a 50 per cent probability to this scenario. On the other hand, in the bull case, Morgan Stanley sees the Sensex reaching 1,00,000 by June 2026. However, Morgan Stanley sees a 20 per cent probability of a bear case in which the Sensex may drop to 70,000 by June 2026.

“Despite the near-term uncertainty, there is considerable value in the current market. Long-term investors would do well to accumulate quality stocks on dips, as any eventual recovery could be swift and decisive,” Gorakshakar noted.

At this juncture, experts say a significant rally appears unlikely. A consolidation may continue as the market digests global developments, macro prints and Q4 earnings.

"The market is expected to consolidate in the coming months, reacting to developments such as the progress of the monsoon season, quarterly earnings, and broader economic indicators," said Gorakshakar.

The key risk for the market could be a change in stance by foreign institutional investors (FIIs).

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, pointed out that sustained FII buying, which played an important role in this rally, appears to have 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 Vijayakumar.

FIIs are tracking the dollar index and responding to currency volatility. If earnings revive notably, they may engage in aggressive buying.

"While Q4 earnings were a mixed bag — neither particularly weak nor inspiring — investors are now looking for green shoots in the April-June quarter results," said Gorakshakar.

Furthermore, the recent downgrade of US creditworthiness could create fresh opportunities for foreign capital inflows into emerging markets, including India, making the current phase an attractive entry point for investors.

Amid prevailing global headwinds, the market's trajectory will depend on economic growth, inflation trends, and monetary policy decisions.

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

"Even when the market turns weak, domestic demand-driven segments like financials, telecom, aviation, etc., 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 IndiGo. This message from the market is important," said Vijayakumar.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.

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