Trade Setup for December 1: Analysts prefer fresh Nifty positions only after a healthy pullback

The Indian equity market ended flat for the second straight day, with the Nifty holding above 26,200. Some profit taking at higher levels, however, dragged the index back toward the 26,200 mark.

Consolidation continued for the second consecutive session on Friday, with the Nifty slipping 12 points to close at 26,203.

After a positive start, the market failed to sustain early gains and gradually weakened through the mid and later part of the session amid a largely range bound trade.

Despite the muted close, the Nifty extended its winning streak for a third week, finishing at fresh record highs on a weekly basis.

Broader markets outperformed the benchmarks, led by financials, with both the Nifty and Sensex rising 0.6% each. Thirty of the 50 Nifty stocks ended higher for the week.

Within the Nifty basket, Mahindra & Mahindra, Adani Enterprises and Sun Pharma were among the key gainers, while SBI Life, HDFC Life and Shriram Finance saw notable selling pressure.

Sectorally, auto, pharma and healthcare indices closed with gains, while oil & gas, financial services and realty ended in the red.

The broader market also edged lower on Friday, with the Nifty Midcap 100 down 0.11% and the Nifty Smallcap 100 lower by 0.27%.

Looking ahead, after hitting a new high this week, markets are expected to maintain a gradual upward bias, with investors turning their attention to the RBI's policy meeting next week.

The coming week will be crucial for India Inc, with major economic and policy events lined up, the winter session of Parliament begins Monday, the RBI's MPC meets later in the week, e-commerce platform Meesho's IPO opens, and auto industry body SIAM will release November sales data tomorrow.

According to Nagaraj Shetti of HDFC Securities, the underlying uptrend in the Nifty remains intact. He expects the current choppy movement to eventually lead to another sharp breakout, with the near term upside target seen around 26,600 and immediate support at 26,050.

Nilesh Jain of Centrum Broking said the 21-DMA support at 25,890 remains critical. As long as the Nifty holds above this level, the broader uptrend is likely to continue.

However, he cautioned that chasing the index at elevated levels is not advisable given the unfavourable risk-reward setup. Waiting for a healthy pullback would be a more prudent strategy for initiating fresh positions, he added.

Rajesh Bhosale of Angel One said the midpoint of Wednesday's bullish candle near 26,000 is likely to act as immediate support, while the lower end of the candle around 25,850 forms a strong structural base, coinciding with the previous week's low.

On the upside, once the Nifty sustains above 26,300, he expects broad-based buying to take the index toward 26,500-26,700 in the near term.

According to LKP Securities' Vatsal Bhuva, the index may trade in a range with support at 26,100 and resistance around 26,300-26,350. A close above 26,300 could open the gates for a move toward 26,600.