Consolidation before the next rally? What Charts Say on Nifty, New Year Picks and Sectors

Indian equity markets started the week on a positive note, but the momentum quickly eased with benchmark indices largely range-bound in the past few sessions. According to Jigar S Patel, senior manager of equity research at Anand Rathi, the broader technical setup remains bullish despite the possibility of near-term consolidation.

Nifty: Consolidation before next higher move

From a chart perspective, Patel noted that Nifty continues to trade above all its key moving averages, 20, 50, 100 and 200-days, indicating an intact uptrend.

“In the near term, Nifty is likely to consolidate in the 26,000-26,350 range. We had earlier seen a similar consolidation between 25,700 and 26,000, followed by a breakout. A similar pattern may be seen again,” he said.

Immediate support is placed at 26,000, followed by strong support at 25,700. On the weekly chart, 25,700 remains a critical level, aligned with the 50-day exponential moving average.

“Until 25,700 is decisively breached, the overall setup remains bullish. The strategy should be to buy on dips with stop-losses near 25,700, while the all-time high remains the next upside target,” added Patel.

Moving average signal strength

Reinforcing the bullish bias, Patel highlighted that all key moving averages are sloping upwards.

“This confirms that the trend is positive. Any correction towards support should be seen as an opportunity rather than a threat,” he said.

Mid-caps: Signs of a revival emerging

After underperforming for several months, mid-cap stocks have started showing relative strength over the past few sessions.

“Nifty midcap indices are trading above all major moving averages and have taken support near the 22,000 zone,” Patel said.

He expects Nifty Midcap 150 to move towards 23,000–23,200 levels in next 1-2 months, with strong support around 22,000–22,100.

Patel believes that mid-caps may outperform large-caps in the near term, especially as many beat-down stocks are showing early signs of reversal.

Railway stocks back in focus

Among mid-caps, railway stocks are attracting renewed interest ahead of the Union Budget.

“Many railway names like IRCON, RITES and RVNL have recovered around 60% from their July 2024 highs and are now forming a base pattern,” Patel said.

He pointed out that many of these stocks have shown a double-bottom formation near the long-term moving averages, suggesting an improvement in risk-reward over the next 2-4 months.

Sector View: IT, FMCG, Metals

IT Sector:

The Nifty IT index saw a strong rally from the 33,400 zone to around 39,500. While a temporary hiatus cannot be ruled out, Patel remains bullish on the sector from a medium-term perspective.

“The key base for IT is close to 37,500. Any reduction should attract buying interest, and the sector looks well positioned for 2026,” he said.

FMCG:

The FMCG index is consolidating in a broader 54,000-57,000 range.

“This consolidation may eventually resolve on the upside. Stocks like ITC and Nestle India look attractive over the medium term,” Patel said.

It expects ITC to move towards the 450–460 level, while Nestlé India may break above the 1,200 mark and move towards 1,400–1,500 by 2026.

Metals:

While the structure remains positive, Patel cautioned against new positions at current levels.

“The metals boom appears to be extended. Copper, for instance, has rallied nearly 90% from its September 2025 low. A mean reversion cannot be ruled out,” he said, advising investors to book profits and avoid fresh exposure for now.

Stock-specific picks

Coal India:

Coal India has broken out of a long consolidation phase on the weekly chart.

“The stock is holding above the 395 breakout zone. The medium-term target for 2026 is 460–470, with a stop-loss below 370 on a daily close basis,” Patel said.

Trent:

The trend has recovered sharply from its highs and is now looking for support near the 200-week exponential moving average.

“The structure suggests a potential recovery towards 6,600-6,700 levels by 2026,” he added, with a stop-loss below 3,400 on a daily closing basis.

Areas to avoid

Patel advised caution in precious and base metals coupled with a sharp rally in commodities.

“Gold, silver and copper are seeing sharp moves, risk-reward is unfavorable at current levels. Better to stay on the sidelines for now,” he said.

disclaimer: Recommendations, suggestions, views and opinions given by experts/brokers do not represent the views of Economic Times.