Benchmark indices Nifty and Sensex surged for the third straight session, driven by a strong rally in metal and banking stocks, which lifted market sentiment. However, gains were tempered as the IT index slipped over 1 percent, limiting the upside.

The frontline indices staged a massive rally on March 18, posting its biggest single-day gain in two months. The Sensex surged as much as 1,200 points while the Nifty closed over 300 points higher at about 22,800. A sharp market rally on March 18 was driven by massive short covering by foreign investors, who turned net buyers of Indian equities after a month of heavy selling.

At about 10:45 am, the Sensex was up 202.86 points or 0.27 percent at 75,504.12, and the Nifty was up 72.50 points or 0.32 percent at 22,906.80. About 2,703 shares advanced, 655 shares declined, and 133 shares unchanged.

As for the broader market, the midcap 100 and smallcap 100 indices mirrored positive trends and outperformed the frontline indices with gains of 1.80 and 1.33 percent, respectively. "Small-cap stocks have reached reasonable levels but are not yet cheap, while mid-caps may still have some pain left," Aishvarya Dadheech, Founder and CIO of Fident Asset Management said in a conversation with Moneycontrol. He anticipates stronger inflows into large caps, followed by small caps, with mid-caps lagging.

"Key factors shaping the recent trend include a softer dollar index, which has eased from 110-111 to 103, and a noticeable decline in foreign institutional investor (FII) selling, which has dropped by nearly 40-50 percent, and better-than-expected inflation data," Dadheech says.

Despite these positives, Dadheech expects choppiness ahead but believes the market will gradually strengthen. He describes the trend as an "extended W," indicating phases of recovery with an overall upward bias. However, he remains cautious about FII selling, which he expects to continue for a couple more months, though at a reduced quantum.

Foreign institutional investors (FII/FPI) turned net buyers after a month of relentless selling on March 18, buying shares worth Rs 1,462.96 crore while domestic institutional investors (DII) remained net buyers of shares worth Rs 2,028.15 crore, provisional data showed.

Sectoral indices saw a mixed session, with Nifty Metal emerging as the top performer, climbing over 1 percent, driven by gains in JSW Steel and Tata Steel. Nifty Bank followed closely, rising 0.6 percent, while the Auto index extended its momentum, adding 0.5 percent. Other sectors, including consumer durables, oil & gas, and realty, posted gains between 0.4 to 1.2 percent.

On the flip side, Nifty IT was the biggest laggard, tumbling nearly 2 percent, weighed down by TCS, HCL Tech, and Tech Mahindra.

"Nifty has formed a strong bullish candle on the daily chart, decisively breaching the 22,650 hurdle, supported by broader market participation. With sentiment improving, there is scope for further upside, with 23,000 acting as a key resistance. A decisive move above this level could open the door for targets of 23,800 and 24,200 in the coming days," Prabhudas Lilladher said in a note.

For Bank Nifty, the index has surged past the 49,000 mark and breached the crucial 50-EMA at 49,200, strengthening the positive bias. Frontline banking stocks like ICICI Bank, HDFC Bank, Axis Bank, and Kotak Bank are showing technical strength, which could support further gains, the brokerage added. Key support for the day is at 22,700, while resistance stands at 23,000. The expected trading range for Bank Nifty is 48,900–50,000. The Bank Nifty recorded a 2 percent gain in the previous session.

In today's session, steel stocks gained up to 4 percent after the Directorate General of Trade Remedies (DGTR) recommended the imposition of a provisional safeguard duty on Flat Steel Products, CNBC-TV18 reported. The recommendation came after the authority observed that there had been a sudden spike in the imports of these products into India. This could have a serious impact on the domestic companies.

BPCL shares rose over a percent after it entered into a quadripartite Memorandum of Understanding (MoU) with BluJ Aerospace, the Agency for New and Renewable Energy Research and Technology (ANERT), the Government of Kerala, and Cochin International Airport (CIAL) to develop the first hydrogen-fueled Vertical Take-off and Landing (VTOL) aircraft ecosystem globally.

Tata Steel, Shriram Finance, IndusInd Bank, Apollo Hospitals, and Bajaj Finance were the top gainers on the Nifty. Laggards included TCS, HCL Tech, Tech Mahindra, Infosys and Sun Pharma