Sensex Surges 573 Points, Nifty Hits Record High Above 26,300

Market Hits New Peak to Start 2026

Indian equity markets began the second trading day of 2026 on a strong footing, with benchmark indices scaling new lifetime highs. The BSE Sensex surged 573 points to close at 85,762, while the NSE Nifty 50 climbed 182 points to settle at 26,328. The rally was broad-based, fueled by persistent buying from domestic institutional investors, positive global market signals, and growing anticipation around the upcoming corporate earnings season.

During the session, the Nifty 50 touched an all-time intraday high of 26,340. The positive sentiment was widespread, with the Nifty Bank index also crossing the significant 60,000 mark for the first time, reflecting robust investor confidence in the banking sector.

Sectoral Performance and Key Drivers

The day's gains were led by a strong performance in cyclical sectors. The Nifty Auto, Nifty Financial Services, and Nifty Metal indices were among the top performers, indicating a risk-on appetite among investors. PSU banks also saw significant buying interest, with analysts recommending a 'buy-on-dips' strategy for stocks like SBI and Bank of Baroda, citing potential short-term gains of up to 8%.

Conversely, the Nifty FMCG index was the primary laggard, dragged down by a sharp fall in ITC shares. The tobacco-to-hotels conglomerate faced multiple brokerage downgrades following a government decision to hike excise duty on cigarettes, which analysts predict could lead to a 20% increase in prices.

Stock-Specific Action

Several individual stocks were in the spotlight. Vodafone Idea shares jumped nearly 10% after news of a Rs 5,836 crore group settlement and a further commitment of support from the Vodafone Group, boosting hopes for the telecom operator's survival. However, some analysts remain cautious, with Emkay projecting a significant downside despite the AGR relief.

In the auto sector, TVS Motor and Hero MotoCorp shares gained 3% and 2% respectively, following strong December sales figures. Ashok Leyland also continued its winning streak, rising 2% for its fifth consecutive session. Defence stocks continued to attract investors, with one company, up 2,100% in five years, securing a second order in two days.

On the losing side, ITC and Godfrey Phillips slid up to 5% due to the new cigarette tax. The decline in ITC's stock price reportedly caused a notional loss of Rs 11,500 crore for its largest shareholder, LIC.

Broader Market and Global Cues

The rally was not confined to large-cap stocks. The BSE SmallCap and Nifty Midcap 100 indices also registered healthy gains of 0.62% and 0.82% respectively, signaling broad market participation. The positive sentiment was further supported by a rally in global equities, with Britain's FTSE 100 index crossing the 10,000 mark for the first time.

Analysts attribute the market's upward momentum to a confluence of factors. These include expectations of interest rate cuts by the U.S. Federal Reserve, a stable domestic economic outlook, and the build-up to the Q3 earnings season, which is expected to show continued growth. While Indian market valuations remain above regional peers, reports suggest they are less expensive than U.S. markets when considering the strong earnings growth trajectory.

Market Outlook

Looking ahead, market participants will closely watch the upcoming corporate earnings for further direction. Analysts remain broadly optimistic for 2026, with some projecting a potential Nifty target of 29,000. Sectors like IT, realty, pharma, and capital expenditure-related industries are expected to be in focus.

Technical indicators also suggest a bullish outlook. The Nifty has shown a convincing consolidation breakout, with technical experts targeting levels of 26,500 in the near term, while the Bank Nifty is projected to move towards 61,000. However, investors are advised to remain watchful of global macroeconomic developments and potential risks that could temper the rally.