Sensex, Nifty Start 2026 on a Cautious Note After Giving Up Early Gains
Indian equity markets began calendar year 2026 on a subdued footing, with benchmark indices surrendering early gains and slipping into mild negative territory amid thin trading volumes and cautious investor sentiment. The Sensex fell nearly 200 points from the day’s high, while the Nifty slipped below the 26,150 mark in the first trading session of the new year, reflecting a lack of strong directional cues.
Market activity remained muted as several major global markets stayed shut for the New Year holiday, resulting in low liquidity and limited overseas cues. Investors also chose to book profits in select sectors after the sharp year-end rally, while persistent foreign fund outflows weighed on sentiment.
At around mid-day, the Sensex was trading marginally higher at 85,255.59, up just 0.04 percent, while the Nifty hovered at 26,145.75, up 0.06 percent. Market breadth was mixed, with 1,962 stocks advancing, 1,564 declining and 166 remaining unchanged.
Muted Start Follows a Strong Market Performance in 2025
The cautious opening of 2026 comes after a relatively strong performance by Indian equities in 2025. During the previous calendar year, the Sensex gained 7,081.59 points, or about 9 percent, while the Nifty rose 2,484.8 points, delivering returns of roughly 10.5 percent.
Despite these gains, investors appear reluctant to take aggressive positions at the start of the new year, preferring to wait for clearer global cues, earnings updates and policy signals before committing fresh capital.
Also Read : Dalal Street Cheers A Broad Rally With Sensex Jumping 546 Points And Nifty Firm Above 26,100
FII Selling Continues to Pressure Market Sentiment
One of the key drags on the market was continued selling by foreign institutional investors (FIIs). FIIs offloaded equities worth Rs 3,597.38 crore on Wednesday, extending their selling streak to seven consecutive sessions. For December 2025 alone, net FII outflows stood at Rs 34,349.62 crore.
Sustained foreign selling has kept a lid on upside momentum, even as domestic institutional investors provide partial support. Market participants remain watchful of global interest rate expectations and geopolitical developments that could influence foreign flows in the coming weeks.
Thin Trading Volumes Limit Upside in Holiday-Impacted Session
Liquidity remained thin in the first session of 2026 as most major global markets, including those in the US, Europe and parts of Asia, were closed for New Year’s Day. The absence of strong global cues resulted in range-bound trading and limited follow-through buying.
“Indian equity markets step into the first trading session of 2026 on a cautiously optimistic note, set against a globally quiet backdrop as most major international markets remain closed for New Year’s Day,” said Ponmudi R, CEO of Enrich Money. He added that with overseas markets shut, early liquidity was expected to remain subdued.
Profit Booking Hits FMCG and Pharma Stocks
Profit booking emerged in defensive pockets such as FMCG and pharmaceuticals, adding to intraday volatility. Tobacco stocks came under sharp pressure after the government announced a new excise duty on cigarettes, triggering heavy selling across the segment.
ITC shares plunged more than 6 percent to Rs 378.45, making it one of the top losers on the Nifty 50. Godfrey Phillips India also saw steep losses, tumbling nearly 10 percent to Rs 2,484.80 in early trade.
“Benchmarks are expected to remain sideways with selective buying amid thin trading volumes due to New Year holidays across global markets,” said Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services. He noted that upcoming quarterly earnings, India-US trade negotiations and the Union Budget would be key drivers for markets in the near term.
Weekly Derivatives Expiry Adds to Intraday Volatility
Adding to market swings, Thursday marked the first weekly derivatives expiry of calendar year 2026. Expiry sessions are typically marked by heightened volatility as traders square off or roll over positions, often leading to sharp intraday moves in benchmark indices.
Such technical factors, combined with low volumes, contributed to the Sensex and Nifty giving up early gains and trading in a narrow range for most of the session.
Rupee Weakness Weighs on Investor Confidence
The Indian rupee also exerted pressure on equities, depreciating 11 paise to 89.99 against the US dollar in early trade. The currency opened at 89.94 and weakened further amid persistent foreign fund outflows and subdued risk appetite.
A weaker rupee tends to dampen sentiment in equity markets, particularly for stocks dependent on foreign capital flows, although exporters may benefit in the medium term.
Technical View Signals Cautious Optimism
From a technical perspective, analysts remain cautiously optimistic but alert to near-term risks. Anand James, Chief Market Strategist at Geojit Investments, said the recent breakout attempt had opened room for further upside, but the late-session decline warrants caution.
“While the rise above 26,027 set off upsides yesterday, the closing hour’s decline prompts us to keep the downside marker near the 26,100 zone for initial upside plays aiming 26,300 and beyond,” he said. “A decisive fall below 26,027 would weaken the bullish setup.”
Market Outlook Remains Range-Bound
Overall, the first trading session of 2026 reflected a wait-and-watch approach by investors. With thin volumes, ongoing FII selling and upcoming macro and earnings triggers, markets are likely to remain range-bound in the near term, with stock-specific action dominating headline indices.
