Trade Setup for January 2: Nifty ends near flat but charts hint at breakout above 26,200

The Nifty extended its winning streak for the second consecutive session, inching up 16 points to close at 26,146, even as the market ended near the flatline. The benchmark managed to hold comfortably above the 26,100 mark throughout the session.

The index opened 44 points higher but spent most of the day consolidating in a narrow range. The intraday high low span was limited to about 85 points.

Bajaj Auto, Shriram Finance and NTPC emerged as the top gainers within the Nifty pack. On the other hand, ITC, Tata Consumer and Dr Reddy's Laboratories faced selling pressure and ended among the key laggards.

Gains in the index were capped as ITC witnessed a sharp selloff. The stock was the biggest drag on the Nifty, tumbling 9% after the government sharply raised excise duty. Nearly 40 Nifty constituents ended in positive territory, but the steep fall in ITC kept overall gains muted.

The decline in cigarette stocks followed the Finance Ministry's notification setting February 1 as the effective date for the additional excise duty on tobacco products, along with the imposition of a health cess on pan masala.

On the sectoral front, all indices closed higher except FMCG, Pharma and Healthcare. Auto, Realty and Metal stocks led the gains.

Broader markets delivered a mixed performance. The Nifty Midcap 100 advanced 0.45%, while the Nifty Smallcap 100 slipped marginally by 0.05%.

From a technical perspective, Nagaraj Shetti of HDFC Securities said the Nifty is undergoing a brief consolidation in the 26,100 to 26,200 zone.

He expects a sharp breakout towards the 26,300 to 26,400 range in the near term, with immediate support placed at 26,050.

Sudeep Shah of SBI Securities said the 26,200 to 26,240 zone will act 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. On the downside, he sees immediate support in the 26,030 to 26,000 zone.

Nandish Shah of HDFC Securities added that a sustained move above 26,234 could signal a breakout from the ongoing consolidation phase and pave the way for a retest of all time highs and potentially higher levels. He expects the 25,900 zone to act as immediate short term support.