Indian stock markets rallied for the third consecutive session on Wednesday, driven by gains in financial stocks and a sharp rebound in midcaps, as investors capitalized on improved valuations.

The NSE Nifty 50 climbed 0.32% to 22,907.60, while the BSE Sensex advanced 0.2% to close at 75,449.05. Midcap and smallcap stocks saw strong buying interest, with their respective indices jumping 2.6% and 2.4%. Notably, the midcap index posted its biggest single-day percentage gain since June 2024.

Mohit Nigam, fund manager at Hem Securities, pointed out that stock valuations had eased to levels that could support a sustainable recovery. He also dismissed concerns over potential U.S. tariffs on Indian exports, calling them "overblown."

Despite the recent uptick, Nifty remains 13% below its record high from September 2024, while midcap and smallcap indices are down 17% and 20%, respectively, from their peaks.
For the first time in March—and only the fourth time in 2025—foreign portfolio investors (FPIs) turned net buyers of Indian stocks, according to provisional data released on Tuesday.

Sectoral Highlights: Financials and Metals Lead Gains
• Financial stocks (NIFTYFIN) led the charge, rising 0.7%, with analysts expecting them to outperform the broader market due to compelling valuations.
• Metals sector (NIFTYMET) surged 1.3% after the Indian government proposed a 12% safeguard duty on certain steel imports to protect domestic manufacturers.
• Defence stocks saw significant gains, with Garden Reach Shipbuilders & Engineering (GRSE.NS) soaring 20%.

The rally was partially offset by weakness in IT stocks (NIFTYIT), which dropped 1.1% as investors awaited the U.S. Federal Reserve’s policy decision later in the day.

Major tech stocks such as Infosys (INFY.NS) and Tata Consultancy Services (TCS.NS) slipped 1.5% each, weighing on both the IT sector and blue-chip indices.

Investors remain cautious, closely watching the Fed's commentary on the U.S. economy and future interest rate policies. The central bank is widely expected to keep rates unchanged but its guidance on economic outlook and trade policies could impact sentiment in emerging markets like India.

With improving valuations, a return of foreign investors, and strong sectoral performances, Indian equities are showing signs of a potential sustained rebound, despite global uncertainties.