Nifty falls 2% after coming within 170 points of record high. What’s next for investors?

After coming within touching distance of a fresh record, the Nifty is down over 2% from its peak as uncertainty over the India-US trade deal, fading hopes of a US Federal Reserve rate cut in December and periodic FII selling have dampened investor sentiment. However, analysts believe the ongoing pullback is a healthy consolidation within a broader uptrend, with key technical levels expected to determine near-term direction.Ajit Mishra, SVP at Religare Broking, said markets are likely to remain within a range in the near term with domestic earnings announcements and global macro developments driving sentiment. “While mixed global signals may cause short-term fluctuations, supporting factors such as healthy corporate earnings, some consistency in FII inflows and resilient domestic indicators are likely to provide a floor for the market,” he told ETMarkets.

According to Mishra, after four consecutive weeks of gains, the Nifty has entered a short-term consolidation phase, with support near 25,600 – in line with the 20-day exponential moving average – and further down at 25,400. “On the upside, resistance is seen around 26,100, and a sustained move above this level could open the door to a new record high,” he added.ICICI Securities reiterated a similar view and noted that the index has recovered from its earlier resistance zone, which has now turned into support around 25,650. “However, the index continues to maintain a lower-low, lower-high pattern for the fourth straight session, indicating a continuation of a healthy retracement of its previous increase,” the report said. The brokerage expects this consolidation in the 26,100–26,700 range to be part of the prevailing structural uptrend and sees incremental buying opportunities emerging at lower levels.

“The focus should be on accumulating quality stocks on dips backed by strong gains as the key support is placed at 25,400, being the 50% retracement of the recent upward move coupled with the one-year downward trendline breakout area,” ICICI Securities added.

Meanwhile, FIIs have turned net positive after three months of selling – a trend that, if sustained, could strengthen market sentiment. Other key triggers to watch include developments around the India-US tariff negotiations and the progress of the Q2 2026 earnings season. Amruta Shinde of Choice Equities advised traders to remain cautious and adopt a buy-on-dips approach amid the prevailing volatility. “Booking partial profits during rallies and using tight trailing stop-losses will be essential for effective risk management. New long positions should be considered only if the Nifty remains above the 26,100 level,” she said. Axis Securities set immediate upside targets at levels of 25,829-25,987 if the Nifty manages to trade above 26,100. However, a decline below 25,737 could trigger profit booking, pushing the index down to the 25,672–25,514 level.

Overall, analysts agree that the market’s undertone remains cautiously bullish, with 25,400–25,600 serving as a critical support zone. India’s heartbeat indices Nifty and the BSE Sensex ended with sharp cuts on Tuesday, continuing their losing streak after a lull on Monday amid sharp cuts in IT, auto and metal stocks. Nifty closed at 25,597.65, down 165.70 or 0.64%, while the 30-share Sensex settled at 83,459.15, down 519.34 points or 0.64%.

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of the Economic Times)