Trade Setup for Budget 2026: Market pins hopes on reforms to push Nifty higher

The Nifty 50's three-session winning streak snapped on Friday as investors turned cautious ahead of the Union Budget's special Sunday session on February 1. The benchmark witnessed profit booking amid consolidation and ended the day below the 25,350 mark.

After opening with a 171-point gap-down, the index staged a recovery in the early part of the session, moving within a narrow range.

While there was an attempt to extend the rebound during mid-to-late trade, the Nifty failed to hold on to higher levels and eventually closed off the day’s highs.

The index declined 98 points to settle at 25,320. Despite the day's fall, the holiday-shortened week saw the Nifty gain 1.10%.

Among individual stocks, Nestle India, Tata Consumer Products and Apollo Hospitals emerged as the top gainers on the Nifty. On the other hand, metal heavyweights Hindalco, Tata Steel and Coal India ended as the biggest drags on the index.

Sectoral performance remained mixed. Metals, IT and Financial Services witnessed the sharpest cuts, while Media, FMCG and Consumer Durables indices outperformed.

The Nifty Metal index plunged over 5%, marking its steepest single-day fall since April 7, 2025. The sharp sell-off followed a rout in global commodities, with copper and aluminium futures tumbling over 6%, while gold and silver slid 7% and 15%, respectively.

ALSO READ | Silver Price Crash Explained — Three factors that triggered the 37% plunge on Friday

In the broader market, the Nifty Midcap 100 slipped 0.2% on mild profit booking, while the Smallcap 100 bucked the trend to close 0.32% higher.

Market mood

Going into the Budget, market mood remains cautious, with frontline indices trading off their peaks. The Nifty is down 4% from its highs, the Nifty Bank has corrected 1.5%, the Nifty IT index has plunged 17%, and Reliance Industries is lower by 13%.

Pressure is also visible in the broader space, with the Midcap index down 5%, the Nifty Next 50 lower by 13%, and the Smallcap index off 14% from their respective highs.

Currency weakness is adding to the cautious undertone. The rupee is at a record low, down 5.5% against the dollar since the last Budget. In dollar terms, the Nifty is trading 6% below its highs.

Stock-specific action is expected over the weekend as key companies such as Sun Pharma, Bharat Dynamics, GAIL, Delhivery and IDFC First Bank announce their results.

Key data points to track in the coming week include auto monthly sales numbers, January GST collections and movements in metal prices following Friday’s sharp correction.

Globally, Wall Street extended losses for a second straight session, with continued selling in technology stocks dragging the Nasdaq down nearly 1%.

The S&P 500 fell 0.4%, extending its decline after briefly crossing the 7,000 mark earlier in the week.

Commodities saw extreme volatility, with spot silver prices plunging 37% on January 30, marking their steepest single-day fall on record. Futures slid 31%, the sharpest drop since March 1980.

From record levels above $120 earlier in the week, silver prices crashed to $84 in a single session. Gold prices also tumbled as much as 12%, triggered by a stronger US dollar and easing fears around Federal Reserve independence following the nomination of Kevin Warsh, resulting in one of the steepest bullion sell-offs since the early 1980s.

What does the Nifty 50 chart suggest?

Nagaraj Shetti of HDFC Securities said the Nifty is undergoing consolidation near a key resistance zone and is awaiting a decisive trigger from the Union Budget 2026, which will be presented in Parliament on Sunday, February 1.

He said the outcome of the Budget could open fresh moves on either side, with immediate support placed at 25,200. A sustained move above the 25,450-25,500 zone could pave the way for a sharp upside.

Echoing similar views, Sudeep Shah of SBI Securities said the Nifty has failed to decisively close above the 25,450-25,500 resistance zone despite multiple attempts over the past six sessions.

He added that a clear breakout above this band could see the index extend its pullback towards 25,650, followed by 25,800 in the near term.