Dalal Street Begins 2026 With Volatility as Early Gains Fade Into a Flat Close
| Index | Price | Change | % Chg |
| Nifty 50 | 26,146.55 | 16.95 | +0.06% |
| Nifty Bank | 59,711.55 | 129.70 | +0.22% |
| Nifty Financial | 27,666.80 | 53.50 | +0.19% |
| BSE SENSEX | 85,188.60 | 32.00 | -0.04% |
Indian equity markets kicked off calendar year 2026 on a cautious and volatile note, with benchmark indices surrendering early gains to end the session almost unchanged. While buying interest was visible across several sectors such as auto, IT, metals and PSU banks, sharp selling in FMCG stocks—led by ITC after a fresh cigarette tax announcement—capped the upside and kept markets range-bound throughout the day.
The Sensex slipped 32 points, or 0.04 percent, to close at 85,188.60, while the Nifty 50 managed to edge higher by 16.95 points, or 0.06 percent, settling at 26,146.55. Despite the lack of directional momentum, the Nifty remained comfortably above the psychologically important 26,100 level, reflecting underlying support at lower levels.
Also Read : International Funds Deliver Up To 79% Returns In 2025—What Investors Can Expect In 2026
Narrow Trading Range Reflects Cautious Start to the New Year
The first trading session of 2026 was marked by unusually low volatility and limited participation. The Nifty moved within a narrow intraday band of just 84–85 points, the smallest daily range recorded since September 17, 2025. After opening higher and briefly approaching the 26,200 zone, the index slipped into a consolidation phase and traded sideways for most of the session.
Market participants attributed the subdued movement to a combination of profit booking after Wednesday’s sharp rally, thin liquidity, and lingering caution amid mixed global cues. Midday selling erased most of the morning gains, though selective buying helped the benchmarks avoid deeper losses by the close.
ITC Tax Shock Drags FMCG as Cigarette Stocks Reel
One of the key drags on the market was a sharp sell-off in cigarette and FMCG stocks following the government’s announcement of a higher excise duty on cigarettes, effective February. ITC shares plunged 9.7 percent, emerging as the biggest loser on the Sensex and Nifty, while Godfrey Phillips India slumped 17.1 percent.
Analysts at Jefferies described the tax hike as “a clear negative” for ITC, warning that higher levies could hurt volumes and revive concerns about market-share losses to the illicit trade. The steep decline in ITC weighed heavily on the FMCG index, which ended the day down over 3 percent, making it the worst-performing sector.
IT, Auto and Metals Cushion the Downside
Despite the FMCG-led drag, gains in other sectors helped stabilise the market. IT stocks witnessed steady buying after recent corrections, while auto shares advanced on the back of strong sales data and optimism around domestic demand. Metal stocks continued to find support following the government’s decision earlier in the week to impose tariffs on select steel imports.
On the sectoral front:
-
Auto, IT, metal, power, telecom and PSU bank indices gained between 0.4–1.5 percent
-
FMCG fell 3.17 percent, while pharma declined 0.40 percent
The Bank Nifty also ended in the green, rising 0.22 percent to close at 59,711.55, indicating continued strength in banking and financial stocks.
Top Gainers and Losers Highlight Stock-Specific Action
Stock-specific moves dominated the session, underscoring the lack of broad-based momentum.
Top Gainers (Sensex & Nifty):
-
Bajaj Auto (+2.59%)
-
Shriram Finance (+2.39%)
-
NTPC (+1.99%)
-
Eternal (+1.98%)
-
Wipro (+1.52%)
Top Losers:
-
ITC (-9.69%)
-
Tata Consumer (-1.57%)
-
Dr Reddy’s (-1.53%)
-
Bajaj Finance (-1.13%)
-
ONGC (-1.03%)
Broader markets showed mixed trends, with the BSE Midcap index rising 0.3 percent, while the Smallcap index ended flat, reflecting selective participation beyond frontline stocks.
Technical Structure Signals Consolidation Before Next Move
From a technical perspective, the Nifty formed a small-bodied candle on the daily chart, indicating indecision among market participants. The index continues to face resistance near the down-sloping trend line around 26,200–26,240, while recent price action suggests a higher-bottom formation at 25,878.
Analysts believe that the near-term uptrend remains intact.
-
Immediate support is placed in the 26,030–26,000 zone
-
A decisive breakout above 26,240 could trigger an upside move towards 26,300–26,400 in the short term
“After a brief consolidation near 26,100–26,200 levels, the Nifty is expected to break higher, provided it sustains above key support zones,” market analysts noted.
Volatility, Market Breadth and Liquidity Snapshot
Market internals reflected a fairly balanced session, with volatility cooling further.
Advance–Decline Ratio and Market Data:
-
Advancers: 1,683
-
Decliners: 1,448
-
52-week highs: 66
-
52-week lows: 62
-
High band hitters: 79
-
Low band hitters: 52
The India VIX fell 3.06 percent to 9.19, signalling reduced fear and a calmer risk environment despite the choppy session.
Rupee Weakness and Global Cues Add to Caution
The Indian rupee depreciated 10 paise to close at 89.98 against the US dollar, pressured by sustained foreign fund outflows and a mildly negative bias in domestic equities. Currency weakness added a layer of caution, particularly for import-heavy sectors.
Global markets offered limited support, with US equities trading lower:
-
S&P 500 fell 0.7 percent
-
Nasdaq 100 declined 0.8 percent
-
Dow Jones slipped 0.6 percent
-
MSCI World Index fell 0.6 percent
Commodities and Broader Outlook
In commodities, copper futures gained 0.4 percent, rising to Rs 1,290.60 per kg on the MCX, supported by higher spot demand and fresh buying interest from participants.
Despite the flat start to 2026, brokerages remain constructive on the medium-term outlook. The Nifty ended 2025 with a 10.5 percent gain, marking its 10th consecutive year of positive returns, even as foreign investors continued to pare exposure. Improving earnings visibility, steady domestic growth, and reasonable valuations are expected to guide markets higher in 2026, albeit with intermittent volatility.
As the first trading day showed, Dalal Street may begin the year cautiously—but underlying resilience suggests investors remain prepared to buy quality stocks on dips rather than exit risk altogether.
Frequently Asked Questions (FAQs) on Market Action in the First Trading Session of 2026
Why did the Indian stock market end flat on the first trading day of 2026 despite early gains?
The market ended flat as early buying momentum faded due to profit booking, sharp losses in ITC after a cigarette tax hike, and cautious investor participation amid mixed global cues.
How did the government’s cigarette tax hike impact FMCG stocks on January 2, 2026?
The increase in excise duty on cigarettes led to heavy selling in tobacco stocks, dragging the FMCG index down over 3 percent and making it the worst-performing sector of the day.
What does the narrow trading range of the Nifty indicate about market sentiment in early 2026?
The tight intraday range signals indecision and consolidation, suggesting investors are waiting for stronger triggers such as earnings, policy clarity, or global market direction before taking large positions.
Which sectors showed resilience during the volatile first session of 2026 and why?
Auto, IT, metal and PSU bank stocks showed resilience due to strong domestic demand indicators, value buying after recent corrections, and supportive policy developments.
How important is the 26,200 level for the Nifty in the near term?
The 26,200–26,240 zone is a critical resistance area; a sustained breakout above this range could trigger a fresh rally toward 26,300–26,400 in the short term.
What does the decline in India VIX suggest for traders and investors going forward?
A falling VIX indicates reduced fear and lower volatility expectations, which typically supports range-bound or gradual upward market movements rather than sharp sell-offs.
How does the first trading session of 2026 set the tone for markets ahead?
The flat but stable close reflects cautious optimism—while volatility persists, investors appear willing to hold quality stocks, positioning the market for selective upside as earnings and macro cues unfold.
