Dalal Street Week Ahead: Uptrend Intact on Weekly Charts, Selective Profit-Taking Likely
By Milan Vaishnav, ET Contributors | Updated Jan 03, 2026, 04:07 PM IST
Indian stock markets closed the past week on a strong note, with the Nifty index achieving a new lifetime high and posting a weekly gain of 1.10%. However, technical indicators suggest that while the broader uptrend remains intact, traders should anticipate selective profit-taking and exercise caution in the week ahead.
Nifty Hits Lifetime High Amid Consolidation
The Nifty index advanced steadily through the last week, gaining 286.25 points to close at 26,328.55 — a fresh all-time high. During the week, the index oscillated within a range of approximately 462 points, recording a low of 25,878 and peaking at 26,340. Despite this strong performance, the market displayed signs of consolidation near the week’s close, trading just below the upper Bollinger band, a technical indicator that often signals potential resistance.
Volatility, as measured by the India VIX, edged slightly higher, rising 3.28% to close at 9.45. Nonetheless, these levels remain relatively subdued by historical standards, indicating that market uncertainty is moderate.
Technical Outlook: Steady Uptrend with Possible Consolidation
From a technical perspective, the Nifty continues to maintain a bullish stance. It trades above its key moving averages—including the 20-, 50-, and 100-week averages—and has decisively broken above a long-term falling trendline resistance that had capped gains since late 2024. However, momentum indicators reveal a more nuanced picture. While the weekly Relative Strength Index (RSI) stands at a neutral 64.19 and has formed a 14-period high—generally considered bullish—it stops short of indicating overbought conditions. The weekly MACD remains above its signal line, confirming an ongoing bullish crossover, yet the momentum as reflected by the MACD histogram has flattened out somewhat, pointing to a potential deceleration in price gains.
No classical candlestick reversal patterns have emerged to suggest an imminent trend change. Still, the proximity to the upper Bollinger band implies that the market may be poised for a period of consolidation or selective profit booking.
Key Support and Resistance Levels
For the upcoming week, technical levels to watch closely include:
- Resistance: 26,500 and 26,720
- Support: 26,000 and 25,800
A sustainable move above 26,500 could trigger attempts to test the upper end of the Bollinger band near 26,712. Conversely, a dip below 25,800 may lead to mild profit-taking, although no severe correction indicators are visible currently.
Sectoral Performance and Market Breadth
Analysis using Relative Rotation Graphs® (RRG), which measure sectoral strength relative to the broader market, reveals that leadership remains steady. Sectors such as PSU Banks, Infrastructure, Metals, IT, Nifty Bank, and Financial Services indices continue to hold positions within the leading quadrant, suggesting they will likely outperform the broader market.
The Nifty Auto and Metal indices have moved into the improving quadrant, marked by sharp positive momentum. On the other hand, sectors like Commodities, Consumption, FMCG, and Realty remain in the lagging quadrant and may underperform compared to the broader Nifty 500 index. Energy, Media, and Public Sector Enterprises (PSE) sectors are also within the lagging quadrant but show signs of improving momentum. The Pharma sector sits comfortably in the improving quadrant.
Traders are advised to closely monitor sectoral trends and adopt a selective stock-specific approach, focusing on segments displaying relative strength.
Strategy for the Week Ahead
Market participants are encouraged to adopt a measured and disciplined stance in the first full trading week of 2026. While the broader trend remains positive with Nifty trading near its highs, the risk of overextension warrants vigilance. Selective profit-taking is likely, and traders should protect accrued gains rather than pursue aggressive new positions at elevated levels.
Risk management and patience will be crucial, especially given signs of mild price fatigue and the need for expanding market breadth to sustain a robust up-move.
Summary
- Nifty closed at a new all-time high of 26,328.55, up 1.10% in the week past.
- Technical indicators confirm a strong uptrend, though momentum is moderating near resistance.
- Volatility remains relatively subdued, with India VIX near 9.45.
- Key resistance lies at 26,500 and 26,720; support levels at 26,000 and 25,800.
- Sector leaders include PSU Banks, Infrastructure, Metals, IT, and Financial Services.
- Selective profit-taking is expected; traders should adopt a cautious, risk-managed approach.
As always, investors should stay informed about market-moving news and adjust strategies accordingly.
The opinions expressed here reflect those of the author and do not necessarily represent the views of The Economic Times.
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