Indian equity markets kicked off 2026 with a subdued range-bound session, managing to close marginally higher despite challenging conditions. The trading session was characterized by thin volumes due to global holidays and persistent foreign institutional investor selling pressure that has been weighing on market sentiment.

Market Performance and Technical Outlook

The market's performance reflected a cautious start to the new year, with investors adopting a wait-and-watch approach. From a technical perspective, the current trend remains inconclusive, though there are signs of potential recovery in the near term. Unlike the Bank Nifty, which has demonstrated a clear breakout pattern, the broader market trend is not decisively bullish yet.

Technical analysts suggest that on the upside, the index could move towards the 26,315 level, while 26,100 may serve as the initial support level for any potential downward movement.

Institutional Investment Flows

The institutional investment landscape presented a mixed picture on the first trading day of 2026:

The continued FII selling pressure highlights ongoing concerns among foreign investors, while domestic institutional investors provided some cushion through their buying activity.

Currency and Volatility Indicators

The Indian rupee faced pressure on the first trading day, depreciating by 10 paise to close at 89.98 against the US dollar. This weakness was attributed to sustained foreign fund outflows and the negative trend in domestic equities, which collectively dented investor sentiment.

In contrast to the currency weakness, market volatility showed signs of easing. The India VIX, which measures fear levels in the markets, declined by 3.06% to settle at 9.18 levels, suggesting reduced anxiety among market participants.

F&O Segment Updates

In the derivatives segment, SAIL has been placed in the F&O ban category. Securities enter the ban period when they cross 95% of the market-wide position limit, restricting further position creation in these stocks.

Market Outlook

Looking ahead, several factors are expected to influence market direction in the coming days. Q3 earnings results will be closely watched for signs of corporate performance, while budget expectations continue to build among investors. Global developments, including potential India-US trade deals and Federal Reserve policy actions, are also likely to play a crucial role in shaping market sentiment. Analysts believe that earnings growth will remain the primary driver for market performance throughout 2026.

Indian equity markets concluded the trading session with mixed results as sectoral divergence dominated investor sentiment. The Nifty 50 managed to sustain its momentum above the 26,000 mark with a slim gain of 0.06% to close at 26,146, while the Sensex ended marginally lower by 32 points at 85,188.

Market breadth remained constructive for the second straight session, with an advance-decline ratio of 1.14 on the BSE, indicating that stock-specific opportunities continued to drive early January trading activity. Auto, Realty, and Metal stocks witnessed healthy buying interest, though gains were capped by sharp declines in FMCG heavyweights.

Sectoral Performance Highlights

The Auto Index emerged as the standout performer, rallying 1% on positive market expectations. In stark contrast, the FMCG Index faced significant pressure, shedding over 3% during the session.

Banking Sector Reports Robust Q3 Business Growth

Several major banks released their Q3 business updates, showcasing strong operational performance across key metrics:

Other financial services companies also reported positive developments, with SG Finserve posting impressive loan book growth of 105% year-on-year to ₹3,211.00 crore as of December 31.

Auto Sector Delivers Strong December Sales

The automobile sector continued its positive momentum with robust December sales figures:

TVS Motor Performance:

• Total sales surged 50% to 4.81 lakh units year-on-year
• Two-wheeler sales increased 48% to 4.61 lakh units
• Three-wheeler sales doubled with 110% growth to 20,318 units
• EV sales jumped 77% to 20,318 units
• Q3 sales rose 27% to 15.40 lakh units

Hero MotoCorp Results:

• Total sales climbed 40% to 4.56 lakh units year-on-year
• Motorcycle sales grew 34.80% to 4.02 lakh units
• Domestic sales increased 42.50% to 4.19 lakh units
• Q3 total sales advanced 15.90% to 16.90 lakh units

Major Corporate Developments

Several significant corporate announcements shaped market sentiment:

Merger Activity: Sapphire Foods announced its merger with Devyani International, effective April 1. Sapphire shareholders will receive 177 Devyani shares for every 100 Sapphire shares held, based on the approved swap ratio.

Operational Updates: Olectra Greentech commenced commercial operations of phase-1 of its Greenfield EV manufacturing facility in Hyderabad on December 31, with an annual per shift production capacity of 2,500 buses.

Order Wins: Railtel Corp secured a letter of acceptance for a ₹56.70 crore order from Assam Health Infrastructure Development & Management Society.

Currency and Derivatives Market

The Indian rupee had a weak start to the year, opening four paise lower at 89.90 against the US dollar and closing 10 paise down at 89.90. In the derivatives segment, Nifty January futures declined 0.02% to 26,291, trading at a premium of 145 points with open interest down 0.16%.

The mixed market performance reflected the ongoing sectoral rotation, with investors focusing on stock-specific opportunities while monitoring corporate earnings and business updates for directional cues.