The first week of 2026 saw Indian equity benchmarks scaling fresh peaks, with the Nifty 50 index decisively entering what analysts term 'blue sky territory'—a zone where the security trades at a lifetime high. According to market expert Vijay L. Bhambwani, this scenario implies that nearly every buyer is in profit, minimizing the risk of distress selling and setting the stage for potential further gains, barring routine profit-taking.
Banking and PSU Stocks Drive Market Momentum
The rally was notably spearheaded by the Bank Nifty, which displayed strong upward impetus. Bhambwani emphasized a critical market axiom: a sustainable broad-market rally is improbable without the participation of banking and financial stocks, given their substantial weightage. Concurrently, public sector undertaking (PSU) stocks witnessed a significant upmove, a trend the analyst has been consistently highlighting. He pointed out that the biggest percentage gainers from the previous Friday are likely to remain in focus as trader exposure increases in this segment.
While the indices climbed, traded volumes were subdued, attributed to the holiday season. The National Stock Exchange's (NSE) market capitalisation rose by 1.58%, indicating a broad-based advance. However, the market-wide position limits (MWPL) saw a routine decline post the monthly derivatives expiry.
Retail Risk Appetite Sees Seasonal Dip
A detailed analysis of futures and options (F&O) turnover reveals a shift in retail trader behavior. Bhambwani's assessment shows that risk appetite diminished significantly last week. The turnover contribution from the capital-intensive and higher-volatility futures segment fell. Within the options space, activity shifted towards lower-volatility index options at the expense of stock options.
"Index options are the least volatile instruments. That tells me risk appetite fell off the cliff last week," Bhambwani noted, partly attributing this caution to the holiday season. Despite this, the NSE advance-decline ratio remained positive at 1.45 (down from 1.51 the prior week), suggesting that intraday buying appetite stayed resilient as long as the ratio holds above 1.0.
Commodities, Energy, and Global Cues
In the commodities space, bullion witnessed above-average volatility and profit-taking, aligning with Bhambwani's previous warnings. He advises long-term investors to stay the course but cautions against leveraging positions. Industrial metals, particularly silver, mirrored this volatile trend with visible profit-taking on exchanges.
Energy prices remained subdued, in line with the analyst's view of well-supplied markets. He expects any rallies to be brief and meet selling pressure. This environment could benefit companies using petroleum-based raw materials, potentially boosting corporate profitability. However, he flagged geopolitical tensions in Iran, Venezuela, and Yemen as outlier events that could trigger short-lived spikes in oil and gas prices.
On the fixed income front, rising benchmark bond yields signal that the cost of funds is likely to stay elevated, prompting investors to await better yields.
Technical Outlook and Key Levels to Watch
The Nifty's weekly chart formed a bullish candle after fulfilling Bhambwani's specified condition of closing above 26,325. With the index trading above its 25-week average, the medium-term outlook remains optimistic. For the current week, Bhambwani estimates a trading range of 26,775 to 25,875 for the Nifty. The 25,800 level is now a critical support that bulls must defend aggressively to prevent downsides.
For the Bank Nifty, which exceeded the previous week's resistance estimate, the projected range is between 61,175 and 59,125. The analyst's proprietary 'impetus' and 'LWTD' indicators suggest the Bank Nifty rally had strong momentum and that the Nifty may see improved buying support on declines.
Bhambwani's concluding advice to traders is to trade light with strict stop losses, avoid counters with wide spreads, and maintain tail risk hedges in a market that, while optimistic, is navigating mixed global cues and seasonal liquidity patterns.
