Trade Setup for January 1: Nifty eyes a move back to 26,250 after ending 2025 on a high

Indian equities snapped a four-day losing streak on the first session of the January series, ending 2025 on a positive note amid broad based buying.

The Nifty staged a sharp rebound of nearly 190 points to settle at 26,129, marking a strong start to the new year.

Despite recent volatility, the benchmark managed to end the calendar year higher. For December, the Nifty remained largely flat, while it delivered gains of about 6% for the quarter and 10.5% for 2025.

After displaying choppy momentum and mild weakness over the past few sessions, the Nifty saw a decisive breakout on Wednesday. The index opened on a positive note and sustained strong upside momentum through most of the session. Some profit booking emerged towards the close, but the benchmark still ended near the day's highs.

Gains were led by heavyweights, particularly Reliance Industries and key banking stocks. Among Nifty constituents, JSW Steel, ONGC and Tata Steel emerged as the top performers, while TCS, Tech Mahindra and Grasim faced selling pressure and closed as laggards.

Steel stocks rallied sharply after the government announced a three-year safeguard duty on select imported steel products, aimed at protecting domestic producers from low cost imports.

Sectorally, barring Nifty IT, all indices ended in positive territory. Oil and Gas, Consumer Durables, Metals and Media led the gains, reflecting broad participation in the rally.

The broader markets mirrored the strength in benchmarks, with the Nifty Midcap 100 rising 0.95% and the Nifty Smallcap 100 gaining 1.10%.

Steel names saw strong buying interest, with JSW Steel and Tata Steel advancing in the range of 2% to 5%. Oil and gas stocks also witnessed a sharp upmove, with ONGC rising nearly 3% and Reliance Industries gaining about 2%.

In contrast, Vodafone Idea came under heavy pressure after the cabinet approved a restructuring plan for AGR dues.

For the full year 2025, both the Sensex and Nifty delivered gains of around 10% each, though they underperformed several Asian peers and global indices.

PSU banks, metals and auto stocks were the best performing segments, rising between 23% and 30%, while media, realty and IT were the worst hit, declining in the range of 12% to 20%. As many as 31 Nifty stocks ended the year with positive returns, with gains ranging from 1% to as high as 72%.

Looking ahead, market experts remain cautiously optimistic. Siddhartha Khemka of Motilal Oswal believes that after a phase of consolidation in 2025, markets could see steady growth in 2026, supported by a recovery in corporate earnings, gradual revival in private sector investment and backing from recent and upcoming government policy measures.

In the near term, however, he expects markets to remain range bound with selective buying, as global trading volumes stay thin due to New Year holidays.

As the market moves into 2026, improving earnings visibility, supportive policy actions and the potential turnaround in foreign institutional investor flows are expected to provide a favourable backdrop for Indian equities.

From a technical perspective, Nagaraj Shetti of HDFC Securities said the Nifty could advance towards the key resistance zone of 26,250 to 26,350 in the short term before facing consolidation. Immediate support is placed at 26,000.

LKP Securities' Rupak De said that the Nifty has reclaimed its 21 day EMA after emerging from a brief dull phase. While the trend is not decisively bullish yet, unlike the Bank Nifty which has seen a clear breakout, the current recovery could extend in the near term. He sees upside potential towards 26,315, with 26,100 acting as initial support.

Nandish Shah of HDFC Securities said a sustained move above the previous swing high resistance of 26,234 could pave the way for fresh all time highs above 26,325 and beyond. On the downside, he added that 25,900 now acts as immediate support, and any decline towards this zone is likely to attract buying interest from positional bulls.

CNBC-TV18 wishes everyone a very happy and prosperous New Year.