Indian Stock Market Suffers 1.3% Decline Despite Outperformance from Mid and Small-Cap Companies

Indian Stock Market Ends Slightly Lower on Thursday

The domestic market benchmarks, the Sensex and the Nifty 50, ended slightly lower on Thursday, 21 May, due to profit booking in select heavyweights, including Reliance Industries, Bharti Airtel, and Infosys. The Sensex ended the day with a loss of 135 points, or 0.18%, at 75,183.36, while the Nifty 50 settled at 23,654.70, down 4 points, or 0.02%.

Market Performance

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The mid and small-cap segments ended higher, with the BSE 150 Midcap index climbing by 0.18% and the BSE 250 Smallcap index jumping 0.70%. Investors are buying and selling selectively as crude oil prices remain above $100 per barrel and the rupee weakens amid persisting uncertainty over a potential US-Iran peace deal.

Market Outlook

Higher crude oil prices have increased inflationary risks and fanned speculation of imminent monetary tightening, keeping the market nervous. Domestic equities erased early gains as concerns over potential RBI rate hikes and weak manufacturing PMI data outweighed optimism from softer crude prices. Uncertainty around US–Iran negotiations, signals of possible domestic monetary policy tightening, and a weaker growth outlook continued to raise macro concerns.

Vinod Nair, Head of Research at Geojit Investments, noted that despite resilience in small caps and selective buying in realty and healthcare, profit booking kept markets flat by the close. Looking ahead, the near-term trajectory hinges on the RBI's June policy decision, progress in US-Iran talks, and the stability of key growth indicators and the rupee.

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Crude Oil and Rupee

Meanwhile, crude oil benchmark Brent Crude jumped more than 2% on Thursday to trade above the $107 per barrel mark amid reports of further tensions in the Middle East. As per news agency Reuters, "Iran's Supreme Leader has issued a directive that the country's near-weapons-grade uranium should not be sent abroad." The rupee rebounded 49 paise from its all-time closing low to settle at 96.37 against the US dollar on Thursday, reported PTI.

Technical Analysis

On the technical front, Shrikant Chouhan, the head of equity research at Kotak Securities, believes 23,500-23,400 remain the crucial support zones, while 23,800-23,850 could act as key resistance areas for the bulls. Sudeep Shah, the head of technical and derivatives research at SBI Securities, said the 23,820–23,850 zone is likely to act as a key resistance for the index. A sustained move above 23,850 could pave the way for an upward move towards the 24,000 mark. On the downside, the 23,550–23,500 zone is expected to act as important support.