Indian equity benchmarks concluded the first trading session of 2026 with mixed performance, as the BSE Sensex closed marginally lower while the NSE Nifty managed modest gains. The session was marked by extreme sectoral divergence, with automobile stocks surging on robust December sales data while FMCG stocks plunged following fresh excise duty on cigarettes.

Market Performance Overview

The benchmark indices displayed contrasting moves in the holiday-shortened session with most global markets remaining closed for New Year's Day. Trading witnessed the narrowest intraday range since September 2025, with the Nifty moving within a mere 84-point band.

Market breadth remained neutral with 2,211 stocks advancing against 1,952 declining on the BSE, where 4,335 stocks were actively traded. As many as 144 stocks hit their 52-week highs, while 87 touched their 52-week lows.

Sectoral Performance and Stock Movements

The automobile sector provided the session's bright spot, rallying over 1.00% on strong December sales data, while the FMCG sector corrected sharply, shedding more than 3.00% following newly imposed excise duty on cigarettes.

Tobacco Sector Impact

Shares of cigarette and tobacco product manufacturers tumbled after the government announced February 1 as the implementation date for additional excise duty on tobacco products and health cess on pan masala. ITC emerged as the session's biggest casualty, wiping out massive investor wealth.

Broader Market Performance

Broader markets outperformed the benchmark indices, showing resilience despite the mixed performance of large-cap stocks.

Institutional Activity

Foreign and domestic institutional investor flows showed contrasting patterns, with DIIs providing support against continued FII selling pressure.

Market Outlook

"The domestic market started the year with a range-bound session and ended slightly higher amid thin trading due to global holidays and continued FII selling," said Vinod Nair, Head of Research at Geojit Investments Limited. "Sectorally, auto stocks gained on strong December sales, while value buying supported IT stocks."

From a technical perspective, analysts maintained a cautiously optimistic outlook. "The zone of 26,200-26,240 will act as an important hurdle for the index," said Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities. "Any sustainable move above the 26,240 level will lead to a sharp upside rally in the index up to the 26,400 level in the short term."

Looking ahead, market participants expect volatility to pick up as attention shifts to the upcoming third-quarter earnings season and Union Budget expectations, with earnings growth likely to remain the key driver in 2026.

Indian equity benchmarks concluded the first trading session of 2026 near the flatline, with mixed performance across sectors. The BSE Sensex and NSE Nifty 50 showed resilience despite significant pressure from tobacco stocks following government policy changes on excise duties.

Market Closing Performance

The benchmark indices displayed contrasting movements at the session close:

The Nifty managed to hold above the crucial 26,100 level, with nearly 40 stocks ending higher on the index. Market breadth favoured advances, indicating underlying strength despite the headline index performance.

Sectoral Performance and Key Movers

Banking and midcap stocks provided crucial support to the broader market during the session. The Nifty Bank index gained 130 points to close at 59,712, while the Midcap index rose 266 points to 60,750.

Top Performers:

Auto stocks witnessed significant buying interest, with Bajaj Auto advancing ahead of its monthly sales announcement. Estimates point to 15.00% sales growth for the company.

ITC Leads Decliners on Excise Duty Hike

The FMCG sector faced severe pressure following the government's sharp increase in excise duty on tobacco products. ITC emerged as the top Nifty loser, ending the session down 9.00% after the finance ministry implemented new duty structures.

The government announced excise duty rates of ₹2,050–8,500 per 1,000 sticks, with variations based on cigarette length, effective from February 1.

Broader Market and Sector Highlights

Telecom stocks gained momentum following positive policy developments. Vodafone Idea and Indus Towers rose after the Cabinet approved restructuring of AGR dues, providing relief to the sector.

Among midcap performers, several stocks registered strong gains:

On the downside, Avenue Supermarts slipped 2.00% ahead of its quarterly update, while PB Fintech declined after RBI raised concerns over higher commissions for insurance companies. MCX witnessed profit booking and ended the session down 1.00%.