Sensex, Nifty End Lower on Dec 24; Market Prediction and Key Levels for Dec 26

Market Wrap: Sensex and Nifty Retreat Amid Year-End Lull; What to Watch for on December 26

The Indian equity markets paused for breath on Wednesday, December 24, as the benchmark indices closed in the red ahead of the Christmas holiday. In what was a relatively muted session characterized by low trading volumes and range-bound movement, investors opted for cautious profit-booking, particularly in heavyweight sectors. This retreat reflects a broader global trend of “wait-and-watch” as the calendar year draws to a close.

Market Performance Summary

By the closing bell, the BSE Sensex had shed 116 points, or 0.14%, to settle at 85,408.70. Similarly, the NSE Nifty 50 ended the day 35 points lower, or 0.13%, at 26,142.10. The broader market indices also felt the heat, with the BSE Midcap index sliding 0.37% and the Smallcap index dipping 0.14%.

The cooling of prices led to a contraction in investor wealth. The total market capitalization of BSE-listed companies, which stood at ₹475.70 lakh crore in the previous session, slipped below the psychological ₹475 lakh crore mark. Key laggards that exerted downward pressure on the benchmarks included market heavyweights Reliance Industries and ICICI Bank, both of which saw mild selling pressure after recent rallies.

Internal and External Catalysts

1. The “Holiday Effect” and Liquidity

Vinod Nair, Head of Research at Geojit Investments, noted that the Indian markets have remained largely range-bound during this holiday-shortened week. “Trading volumes have been understandably thin as institutional and retail participants scale back activity for the year-end,” Nair observed. This trend is not unique to India; most Asian markets have mirrored this subdued behavior as global desks enter a festive hiatus.

2. RBI’s Strategic Interventions

Despite the market’s soft tone, the underlying sentiment is supported by proactive measures from the Reserve Bank of India (RBI). Recent announcements regarding Open Market Operations (OMOs) and USD/INR buy-sell swaps are designed to flush the system with necessary liquidity. These tools are expected to act as a buffer against currency volatility, providing a sense of stability for foreign institutional investors (FIIs) who might be wary of rupee fluctuations.

3. Global Macroeconomic Signals

The global backdrop presents a complex puzzle. While stronger-than-expected US GDP data suggests economic resilience, a creeping rise in unemployment figures has tempered aggressive growth expectations. This “goldilocks” scenario—growth that isn’t too hot and an employment market that isn’t too tight—has fueled hopes for continued dovishness from the Federal Reserve.

Furthermore:

• Gold continues its upward trajectory, bolstered by a weakening Dollar Index and persistent geopolitical friction.

• Brent Crude remains parked near multi-year lows, which serves as a major tailwind for India’s fiscal deficit and inflation management, as it lowers the cost of energy imports.

Technical Analysis: Nifty 50

Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, highlighted that the Nifty 50 encountered a formidable ceiling in the 26,230–26,235 zone. This area aligned perfectly with the previous session’s peak, and the index’s inability to breach it led to a gradual intraday decline.

The “Shooting Star” Warning:

Rishikesh Yedve, AVP at Asit C. Mehta Investment Intermediates, pointed out that the Nifty formed a “Shooting Star” candlestick pattern on the daily chart. This pattern, characterized by a small body and a long upper wick, typically signals that buyers tried to push prices higher but were overwhelmed by sellers.

Key Levels for December 26:

• Immediate Resistance: 26,200–26,250. A decisive breakout above this could propel the index toward 26,350 and 26,500.

• Immediate Support: The 20-day Exponential Moving Average (EMA) near 26,050–26,000.

• Floor Support: A crucial bullish gap exists at 25,990, which should act as a safety net during sudden pullbacks.

Technical Analysis: Bank Nifty

The banking sector has faced a persistent struggle. Since breaking below an upward-sloping trendline on December 17, the Bank Nifty has failed to reclaim its previous momentum.

Sudeep Shah noted that for five consecutive sessions, the index has formed candles with significant upper wicks. This is a classic indicator of “supply at higher levels,” meaning every time the index rallies, sellers emerge to lock in profits.

Key Levels for December 26:

• Immediate Support: 58,900–59,000. If the index slips below 58,900, it could quickly test 58,600 and 58,300.

• Critical Resistance: 59,500–59,600. Until the Bank Nifty closes decisively above this zone, a fresh leg of the bull run is unlikely.

• Closing Note: The index settled at 59,184 on Wednesday, remaining firmly within its recent consolidation range.

Strategy for Traders: What to Expect on Thursday

As the market reopens on December 26 following the Christmas break, volatility may remain low, but the underlying “sell-on-rise” sentiment could persist unless a fresh catalyst emerges.

1. Stock-Specific Focus:

With the benchmarks in a consolidation phase, the “index play” is currently risky. Analysts suggest a stock-specific approach, focusing on sectors that benefit from lower crude prices (Aviation, Paints, Chemicals) or those showing defensive strength (IT and Pharma).

2. Monitoring US-India Trade Relations:

Investors are keeping a close eye on bilateral developments between Washington and New Delhi. Any policy announcements or trade-related commentary could trigger movement in specific sectors like Defense, Technology, or Agriculture.

3. Year-End Rebalancing:

Expect some portfolio rebalancing from fund managers as they prepare for the 2026 calendar year. This often leads to erratic movements in mid-cap and small-cap stocks that may not necessarily align with broader market sentiment.

Final Thoughts

The current market environment is one of cautious consolidation. While the long-term structural story for India remains intact—supported by RBI liquidity and low oil prices—the short-term technicals suggest that the bulls are tired. The Nifty’s “Shooting Star” and the Bank Nifty’s struggle with its trendline indicate that the path of least resistance might be sideways or slightly downward in the immediate future.

Traders should avoid aggressive long positions until the Nifty clears the 26,250 hurdle or the Bank Nifty scales 59,600. Until then, protecting capital and waiting for a clearer directional breakout is the most prudent strategy.