As the year draws to a close, the Indian equity markets, led by the Nifty, are approaching a critical juncture. In his latest weekly newsletter, 'Ticker,' veteran market analyst Vijay L. Bhambwani dissects the forces at play, offering a roadmap for the week ahead ending December 21, 2025.
Market Sentiment and Global Crosscurrents
Bhambwani notes that while bulls appeared lethargic last week, statistical data still offers hope for a potential rally. However, the window for a traditional 'Santa Claus' rally is narrowing fast. The upcoming holiday-shortened week, with Christmas and New Year festivities, typically sees reduced trading volumes. This lack of depth makes markets more susceptible to influence by large players, potentially enabling sharper, though possibly less sustainable, price moves.
The global monetary policy landscape presents a mixed bag. The US Federal Reserve's recent 0.25% rate cut acts as a positive trigger. Conversely, the Bank of Japan's decision to raise coupon rates by 0.25% to 30-year highs poses a negative headwind for emerging markets like India. This hike threatens the longstanding 'carry trade,' where cheap Japanese capital was borrowed to invest in higher-yielding overseas markets, a flow that has supported bull runs globally.
Amid these undertones, safe-haven buying has propelled bullion prices higher. Bhambwani reiterates his long-term optimism for patient delivery-based holders of gold and silver but continues to caution retail participants against excessive leverage, advising them to trade only with their own capital.
Sectoral Performance and Key Indicators
Reviewing the past week, the fall was led by the Bank Nifty, followed by the broader Nifty 50. Pressure on banking stocks came from rising Indian 10-year bond yields and mid-week rupee volatility, though the currency recovered after RBI intervention. Oil and gas prices remained under pressure, aligning with Bhambwani's consistent view that energy markets are adequately supplied.
Industrial metals stayed firm, a trend he has highlighted for months. This firmness, often seen during month-end short covering, could lend near-term support to metal mining stocks. For the week ahead, Bhambwani expects Public Sector Undertakings (PSUs), particularly banks due to their heavy index weightage, to take centre stage if a rally materializes. Energy stocks may also see action, tracking fossil fuel price movements.
Technical Verdict and Trading Strategy for Nifty
Delving into technicals, Bhambwani's analysis presents a cautiously optimistic picture. The Nifty chart formed a bullish hammer last week after two prior bearish ones, indicating proactive bull defence. Crucially, the index remains above its 25-week moving average, supporting a positive medium-term outlook.
The key support level to defend this week is at 25,350, while the resistance and breakout point is pegged at 26,325. A sustained trade above 26,325 is needed to confirm a fresh rally. For the holiday-shortened week, he estimates a trading range of 26,475 to 25,450 for the Nifty and 60,175 to 57,975 for the Bank Nifty.
His proprietary indicators provide nuanced insights. The Market-Wide Position Limits (MWPL) hit a multi-year high, showing deep-pocketed traders are increasing exposure, which could fuel volatility. The 'Impetus' indicator suggests last week's decline was due more to a lack of buying than aggressive selling. Meanwhile, the 'LWTD' indicator reading jumped to 0.57 from 0.21, raising the probability of fresh buying or short covering.
Bhambwani's final advice is prudent: Trade with smaller exposure, maintain strict stop losses, and avoid counters with wide bid/offer spreads. Fixed-income investors should stay ready for better yield opportunities. As markets enter this decisive phase, disciplined risk management will be paramount for navigating potential year-end volatility.
