Indian Stock Market Trends: Sensex & Nifty Rebound Amid Budget Volatility – February 3, 2026 Analysis
India’s stock market is buzzing as Sensex hovers at 85,400 and Nifty steadies near 26,100 — but beneath the calm lies a surprising shift. With GDP soaring 8.2%, inflation plunging, and fresh RBI moves, could 2026 spark an unexpected market breakout? Discover trends driving Dalal Street’s next big move.
Dalal Street faces a subdued start this Friday amid holiday-thinned volumes and mixed global cues. Investors eye consolidation in BSE Sensex and NSE Nifty 50 as key economic drivers like robust GDP growth and easing CPI inflation provide underlying support.
Indian Market Overview
BSE Sensex closed at 85,408.70, down 116.14 points or 0.14%, reflecting profit booking in heavyweights like Sun Pharma and Asian Paints. NSE Nifty 50 settled at 26,142.10, shedding 35.05 points or 0.13%, with selective buying in Trent and Shriram Finance offsetting IT and pharma drags.
Nifty Bank trend showed mild weakness, ending at 59,183.60, down 115.95 points or 0.20%, as BSE and HDFC Life declined while Shriram Finance gained. Investor sentiment remains cautiously optimistic, with RSI near 60 signaling positive momentum despite FII outflows; support holds at 26,012 for Nifty.
Key Economic Drivers
India’s GDP growth hit 8.2% year-on-year in Q3 2025, surpassing estimates and driven by consumer demand and manufacturing resilience amid U.S. tariffs. CPI inflation eased to 0.71% in November 2025, below RBI’s 2-6% target, fostering expectations of steady policy support.
RBI cut the repo rate to 5.25% in December 2025, marking the fourth reduction to bolster growth while monitoring inflation at 3.7% for FY26. Unemployment data reflects improvement, with rates at 4.7% in November, aiding domestic consumption and market stability.
Latest News Highlights
- GIFT Nifty Signals Muted Open: GIFT Nifty traded lower by 46.50 points (0.18%) at 26,130.50, indicating a negative start for Dalal Street on December 26 amid holiday-thinned volumes.
- Post-Christmas Consolidation: Markets expected to trade in a narrow range after December 24's volatile close—Sensex at 85,408.70 (-0.14%), Nifty at 26,142.10 (-0.13%)—with stock-specific action dominating.
- FII Outflows Persist: FIIs net sold Rs 1,993.18 crore on NSE (Dec 24), with December total at Rs 23,830.77 crore outflow; DIIs countered with Rs 2,531.65 crore buying, absorbing pressure.
- Sector-Specific Profit Booking: Metals, realty, auto edged green; oil & gas, IT, pharma down 0.4-0.7%; midcaps fell 0.6%, smallcaps up 0.3%.
- Nifty Technical Outlook: Bearish candlestick with support at 26,000 (gap-up zone), resistance at 26,300; breakout above could target 26,500.
- Bank Nifty Rangebound: Consolidating at 58,500-60,100; support at 58,300-58,600 (50-day EMA), upside above 59,533 towards 60,100 high.
- Stocks in Focus: PNB Housing Finance bullish short-term (+3.6% on Wed); Indian Energy Exchange (IEX) under scrutiny per Economic Times report; Lloyds Metals recommended by Bajaj Broking.
- Global Cues Mixed: U.S. GDP at 4.3% (vs 3.3% expected) boosts sentiment, but tempered by FII flows; Asian markets higher.
Foreign Indices Movements that Influenced Indian Markets
- US S&P 500: Closed at a record 6,932.05 on December 24 (+0.32%), buoyed by strong GDP data at 4.3%, fostering global risk appetite but tempered by holiday caution influencing Indian open.
- US Dow Jones: Hit fresh high of 48,731.16 (+0.60%) in shortened Christmas Eve session, supporting sentiment amid AI and cyclical gains, indirectly aiding Dalal Street stability.
- US Nasdaq Composite: Rose 0.22% to 23,613.31, driven by tech resilience, providing positive cues despite thin volumes ahead of Christmas closure on December 25.
- Japan's Nikkei 225: Opened higher at 50,527.13 on December 26 (up from prior close around 50,344, +~0.36% implied), edging up in thin trade post-US records.
- Hong Kong Hang Seng: No trading on December 25 (Christmas holiday); prior session up 0.17% to 25,818.93, contributing to mixed Asian cues for India.
- China CSI 300: Closed +0.29% at 4,634.06 previously; markets mixed amid fiscal bond plans, with no fresh moves influencing cautious GIFT Nifty.
- Australia S&P/ASX 200: No trading on December 25 (holiday); prior sessions flat, minimal direct sway on Indian indices amid broader consolidation.
- South Korea Kospi: Fell ~2% recently to around 3,999 amid risk-off, adding caution but offset by US highs in shaping flat Indian sentiment.
Performance Overview
Top 10 stocks to buy on NSE/BSE for 2025 include Reliance Industries for diversified growth in Jio and retail, TCS for IT resilience, and HDFC Bank amid banking recovery; rationales hinge on low PEG ratios under 1.5 and dividend yields above 1%.
| Rank | Stock | Sector | P/E Ratio | Dividend Yield | Rationale |
| 1 | Reliance Industries | Diversified | 25.2 | 0.8% | O2C, digital expansion |
| 2 | TCS | IT | 32.1 | 1.5% | AI/cloud demand |
| 3 | HDFC Bank | Banking | 18.5 | 1.2% | Loan growth post-merger |
| 4 | Infosys | IT | 28.4 | 2.1% | Offshore recovery |
| 5 | ITC | Consumer Goods | 26.8 | 3.0% | FMCG stability |
| 6 | UltraTech Cement | Materials | 45.3 | 0.5% | Infra boom |
| 7 | Trent | Retail | 110.2 | 0.0% | Consumption surge |
| 8 | Shriram Finance | NBFC | 14.2 | 1.8% | Rural lending |
| 9 | Apollo Hospitals | Pharma | 85.6 | 0.3% | Healthcare demand |
| 10 | Adani Ports | Logistics | 32.7 | 0.5% | Trade volumes |
December 24 top gainers featured Trent (+2.26%), buoyed by retail festive sales, and UltraTech Cement (+0.87%) on infra triggers.
| Top Gainers (Dec 24) | % Change | Analysis |
| Trent | +2.26% | Festive retail boom |
| Shriram Finance | +1.69% | NBFC recovery |
| Apollo Hospitals | +1.46% | Health sector resilience |
| UltraTech Cement | +0.87% | Cement demand |
| Maruti Suzuki | +0.66% | Auto sales uptick |
| Bajaj Auto | +0.59% | Two-wheeler volumes |
| Power Grid | +0.56% | Transmission capex |
| Coal India | +0.54% | Production ramp-up |
| Bajaj Finance | +0.34% | Consumer loans |
| M&M | +0.34% | SUV demand |
Losers included BSE (-2.41%) on exchange competition and Sun Pharma (-1.05%) amid regulatory scrutiny.
| Top Losers (Dec 24) | % Change | Analysis |
| BSE | -2.41% | Volume pressures |
| HDFC Life | -1.07% | Insurance slowdown |
| Sun Pharma | -1.05% | Pharma export curbs |
| Asian Paints | -0.83% | Margin squeeze |
| PFC | -0.82% | Power finance caution |
| Interglobe Aviation | -1.0% | Fuel cost hike |
| Wipro | -0.9% | IT deal delays |
| Dr Reddy's Labs | -0.8% | U.S. FDA issues |
| Tata Motors PV | -1.07% | EV competition |
| Reliance | -0.68% | Profit booking |
Sector Performance
IT led gains with AI and cloud tailwinds, while PSU banks outperformed on rate cut benefits; banking dipped mildly. Pharma faced headwinds from exports, consumer goods held steady on domestic demand.
| Sector | Weekly Change | Key Driver | Earnings Note |
| IT | +1.2% | AI deals | Q3 beat estimates |
| PSU Banks | +1.5% | Rate sensitivity | NIM expansion |
| FMCG | +0.8% | Rural recovery | Volume growth |
| Consumer Durables | +0.9% | Festive sales | Margin up 200bps |
| Banking | -0.54% | FII selling | Loan growth steady |
| Private Banks | -1.36% | Asset quality | NPA provisions |
| Pharma | -0.7% | Export curbs | U.S. revenue dip |
| Autos | -0.5% | Chip shortages | Hybrid shift |
Data reflects December 22-24 trends, with 9 of 20 sectors positive but under 1% moves signalling rangebound action.
Analysis and Recommendations
Actionable insights favour buy-on-dips near Nifty 26,000 support, targeting 26,350 resistance amid GDP resilience. For low-risk investors, allocate 40% banking (HDFC, SBI), 30% IT (TCS, Infosys), 20% consumer (ITC), 10% pharma (Sun Pharma); pros include dividend stability and earnings growth, cons involve FII volatility.
Medium-risk portfolio: 30% diversified (Reliance), 25% financials (Shriram), 20% materials (UltraTech), 15% retail (Trent), 10% healthcare (Apollo); recent Q3 earnings show 15-20% EPS beats driving upside. High-risk: Tilt to midcaps like One Global Services (PEG 0.5) for 30%+ returns, but cap at 15% allocation due to volatility.
Final Thought
As the year winds down, the Indian stock market reflects a balance between optimism and caution. With the BSE Sensex hovering around 85,400 and NSE Nifty 50 near 26,140, Dalal Street is consolidating after a strong 2025 rally. The Bank Nifty’s range-bound action signals tactical repositioning by traders as domestic tailwinds like 8.2% GDP growth, a sharp fall in CPI inflation to 0.71%, and a repo rate cut to 5.25% set the foundation for a resilient 2026.
Foreign cues—from record highs on the S&P 500 and Dow Jones to mixed moves in Asian indices—continue to shape short-term volatility. However, India’s structural story remains intact: stable macroeconomics, improving earnings visibility, and deepening investor participation.
Looking ahead, a buy-on-dips strategy around Nifty 26,000 appears prudent, with strong potential in banking, consumer, and infrastructure plays. Investors should maintain a diversified allocation, watching for Q4 FY26 earnings momentum and FII flow turnaround in early January.
The Indian market may be pausing—but it’s far from done rallying. The foundation is strong, valuations are moderating, and domestic demand is surging.
Your move: which sector are you betting on as India enters 2026?
Disclaimer: This analysis on Indian stock market trends is for educational and informational purposes only and does not constitute financial, investment, legal, tax, or accounting advice. Markets are volatile; past performance isn't indicative of future results. Consult a qualified financial advisor before making investment decisions.
