Dalal Street Week Ahead: Nifty Enters Consolidation Phase; breakout above 26,100 key for the next market move

The markets consolidated last week and ended slightly negative. Nifty remained within a defined trading range of 25,700 to 26,100 without any directional breakout. The week was marked by low volatility, with India’s VIX falling 5.70% to 9.52, near multi-year lows, underscoring continued complacency in the system. On a weekly basis, the Nifty fell by 80.55 points or 0.31%, signaling a pause after a strong previous uptrend.The Nifty is currently in a sideways consolidation and navigating within a narrow band of 400 points. It continues to trade above the major moving averages, but the lack of follow-on buying at the top end of the range suggests temporary fatigue. Importantly, the 25,700–25,850 zone has emerged as crucial near-term support, not only because it marks the bottom of the current consolidation, but also because it aligns with the 50-DMA. The trend still remains positive overall, but a sustained move above 26,100 is now essential to reignite upward momentum. A breakdown below 25,700 could lead to mild profit-taking and widen the range to the downside.

Given the absence of a decisive move in either direction, markets can expect a subdued start to the upcoming shortened week, especially with the Christmas holidays on Thursday, which will lead to lower participation. On the upside, resistance is expected at 26,100 and then at 26,250. The support points amount to 25,850 and 25,700, both structurally important in the current context. The weekly RSI stands at 59.92 and remains neutral without showing any divergence from the price, indicating continued bandwidth-bound behavior. The MACD remains above the signal line on the weekly chart, although the histogram is flattening, indicating a loss of momentum. No significant candlestick formation was observed during the week, highlighting the indecisiveness.

From a pattern analysis perspective, Nifty is consolidating just above the upper trendline of a wide symmetrical triangle where it broke out earlier. While the breakout still holds, the index is testing its breakout zone. Price action continues to respect the rising short- and medium-term moving averages, with the 50-week MA at 24,518 and the 100-week MA at 24,067 providing deeper structural support. The Bollinger Bands are starting to narrow, which often foreshadows a range expansion in the coming weeks.

Given the current context, participants are advised to take a stock-specific approach while maintaining a cautious stance towards aggressive index bets until the 25,700–26,100 range is resolved. Protecting profits should be a priority, especially if there are no major triggers and low volatility. Until a directional breakout occurs, the method to approach the week ahead would be to remain selective, maintain tight stop losses, and avoid chasing momentum near resistance levels.

In our look at Relative Rotation Graphs®, we compared several sectors to the CNX500 (NIFTY 500 Index), which represents more than 95% of the free-float market capitalization of all listed stocks.

Relative Rotation Charts (RRG) show that the Nifty Bank Index, Infrastructure, PSU Bank, Financial Services and the Midcap 100 Indices are in the leading quadrant. Some of these are clearly seeing their relative momentum decline. Collectively, however, these groups can relatively outperform the broader markets.

The Nifty Auto Index is in the weakening quadrant but is slightly improving its relative momentum. The Metal Index is also in the weakening quadrant.The Commodities Index has entered the lagging quadrant. The media, PSE, consumption, FMCG and energy indices are also in the lagging quadrant and may underperform the broader markets relatively. However, energy is seen to modestly improve its relative momentum.

The IT and Nifty Services sector is in the improving quadrant and is running positively. The real estate sector is also in this quadrant, but is seen to be giving up relative momentum compared to the broader markets.

Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and Founder of EquityResearch.asia and ChartWizard.ae and is based in Vadodara. He can be reached at milan.vaishnav@equityresearch.asia