Indian stock markets kicked off the new year on a robust note, with benchmark indices scaling fresh peaks on the back of sustained investor interest. The rally, which extended gains for a third straight session, was characterized by broad-based buying, particularly in cyclical sectors.
Record Highs and Sectoral Surges
The Nifty 50 index soared to an intraday high of 26,340 points on Friday, eventually settling the week at 26,328.55. This marked a weekly gain of 1.1%. The BSE Sensex also advanced by 0.85%, closing at 85,762 points. Market experts attributed the upward movement to a combination of steady domestic buying and short covering by traders.
Notably, the rally saw participation beyond the large-cap heavyweights, with mid- and small-cap stocks also moving higher. This indicated a healthy breadth in the market's rise. The strength in domestic-oriented sectors like automobiles helped counterbalance muted global cues, as many overseas markets operated with reduced activity due to holidays.
Winners, Losers, and Key Triggers
A clear sectoral divergence was evident. Cyclical stocks enjoyed steady demand, while defensive sectors underperformed. Metals emerged as the top performer for the second consecutive week, jumping nearly 6%. This surge followed the government's decision to extend safeguard duties on certain steel products until April 2028, a move that removed policy uncertainty and improved margin visibility for domestic producers.
Power and automobile sectors also posted strong gains of approximately 4% each. The auto sector's rise was supported by robust domestic sales figures. In contrast, the fast-moving consumer goods (FMCG) sector was the week's biggest laggard, declining about 3.5%. This drop was primarily driven by a 13% sell-off in ITC Ltd after the government raised the effective tax burden on cigarettes from 50% to 61%. Analysts now anticipate cigarette price hikes of 23-50% and a potential volume decline of around 12.5% in FY27.
Other notable stock-specific moves included:
- Ola Electric Mobility's 13% weekly gain after Vahan data showed its market share in the EV segment increased to 9.3% in December from 7.2% in November.
- Vodafone Idea fell 1.3% after receiving a GST penalty notice of nearly ₹80 crore.
- Quick-service restaurant operators Devyani International and Sapphire Foods India were in focus after Devyani announced a $934 million merger.
Global Context and What Lies Ahead
Despite the local rally, Indian equities underperformed compared to key East Asian peers. Markets in South Korea and Taiwan posted sharper weekly gains of about 4% and 3%, respectively. Robin Arya, founder of SEBI-registered corporate research firm GoalFi, explained this divergence was largely due to valuation-led sector rotation and strong rallies in technology and semiconductor stocks in those markets, where India has limited representation. He noted that heavy foreign outflows and a weaker rupee further capped India's relative performance, suggesting this was more of a tactical reallocation than a structural shift away from Indian equities.
Looking to the week ahead, Arya stated that investors will monitor global inflation data, central bank commentary, foreign portfolio investment (FPI) flows, and early signals related to the upcoming Union Budget. Historical data reveals a pattern of caution: Mint's analysis shows Indian equities have typically corrected in the month preceding the budget over the last decade.
"This pattern reflects recurring pre-budget nervousness driven by uncertainty around fiscal stance, taxation changes, and policy surprises," Arya said. He added that current positioning suggests this caution is resurfacing, with foreign investors staying guarded and domestic flows rotating selectively into sectors like railways, infrastructure, and capital goods. Investor focus is now expected to shift towards upcoming quarterly corporate earnings for the next set of market triggers.
