The Indian equity markets maintained their cautious momentum in the second trading session of 2025, with the NSE Nifty 50 extending its winning streak while consolidating above critical support levels. Despite range-bound movement, the index demonstrated resilience by sustaining above the 26,100 zone, supported by strong sectoral rotation.

Market Performance and Key Levels

The trading session concluded with the Nifty managing modest gains while the Sensex faced minor pressure:

According to Nandish Shah, Deputy Vice President at HDFC Securities, turnover on the NSE's cash segment dipped 21%, reflecting holiday-thinned participation that characterized the consolidative trading environment.

Technical Outlook and Breakout Targets

Technical analysts have identified crucial resistance and support zones that will determine the market's near-term direction:

Shrikant Chouhan emphasized that a breakout above the 26,200-26,234 zone could push the market toward 26,300-26,350 levels. Aakash Shah of Choice Broking places immediate resistance in the 26,250-26,300 range, while warning that sentiment could turn vulnerable if the index slips below 25,950.

Sectoral Performance and Market Drivers

Sectoral rotation dominated the trading session with distinct winners and losers:

The Auto sector emerged as the star performer, rallying 1.00% on positive expectations, while FMCG heavyweights faced significant pressure following government policy changes on tobacco taxation.

Bank Nifty Analysis

The Bank Nifty traded in a consolidative manner following recent outperformance, with banking heavyweights showing mixed activity:

A decisive breakout above the 59,900-60,000 range is essential to open doors for further upside toward all-time highs.

Market Breadth and Trading Activity

Market breadth remained positive for the second consecutive session, with an advance-decline ratio of 1.14 on the BSE, suggesting continued stock-specific opportunities in early January trading. The balanced participation indicates that while overall indices remain range-bound, individual stock selection continues to offer potential returns.

Analysts expect the current consolidation phase to continue until the market decisively breaks above the 26,200-26,234 resistance zone, with sectoral rotation likely to remain the primary driver of returns in the near term.

The Nifty extended its winning streak for the second consecutive session, gaining 16 points to close at 26,146, as market participants positioned themselves for a potential technical breakout. Despite ending near the flatline, the benchmark index maintained its position comfortably above the crucial 26,100 level throughout the trading session.

Market Performance and Trading Dynamics

The trading session reflected a consolidation phase, with the index opening 44 points higher but spending most of the day in a narrow trading range. The intraday volatility remained contained, with the high-low span limited to approximately 85 points.

Stock-Specific Movements Drive Index Performance

Individual stock performances significantly influenced the index movement, with nearly 40 Nifty constituents ending in positive territory. However, the overall gains remained muted due to specific sectoral pressures.

Top Gainers:

• Bajaj Auto
• Shriram Finance
• NTPC

Key Laggards:

• ITC (biggest drag, down 9.00%)
• Tata Consumer
• Dr Reddy's Laboratories

ITC's sharp selloff emerged as the primary factor capping index gains, following the government's decision to sharply raise excise duty on tobacco products. The Finance Ministry's notification set February 1 as the effective date for additional excise duty on tobacco products, along with the imposition of a health cess on pan masala.

Sectoral Performance and Broader Market Trends

Sectoral movements showed a mixed pattern, with most indices closing higher except for select defensive sectors.

Broader market indices delivered mixed performance, with the Nifty Midcap 100 advancing 0.45% while the Nifty Smallcap 100 slipped marginally by 0.05%.

Technical Outlook and Breakout Expectations

Market analysts are closely watching key technical levels as the Nifty appears positioned for a potential breakout from its current consolidation phase.

HDFC Securities (Nagaraj Shetti) indicates the Nifty is undergoing brief consolidation in the 26,100 to 26,200 zone, with expectations of a sharp breakout towards the 26,300 to 26,400 range in the near term. Immediate support is placed at 26,050.

SBI Securities (Sudeep Shah) identifies the 26,200 to 26,240 zone as a key hurdle for the index. A sustained move above 26,240 could trigger a sharp upside rally towards 26,400 in the short term, with immediate support seen in the 26,030 to 26,000 zone.

HDFC Securities (Nandish Shah) suggests that a sustained move above 26,234 could signal a breakout from the ongoing consolidation phase, paving the way for a retest of all-time highs and potentially higher levels. The 25,900 zone is expected to act as immediate short-term support.