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.

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.