Steady Fundamentals: Strong GST Collections and Auto Sales Support Nifty Amid ITC Volatility
DSIJ Intelligence-1Categories: Mkt Commentary, Trending
The Indian equity markets commenced the first trading session of 2026 with a cautious yet positive bias, as the Nifty 50 hovered above the 26,200 mark.
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The Indian equity markets commenced the first trading session of 2026 with a cautious yet positive bias, as the Nifty 50 hovered above the 26,200 mark. Despite the initial optimism, the 26,200 level remains a formidable barrier for the index, while downside risks appear well-cushioned with strong support established at 26,000 and 25,800. This 25,800 level marks the lower boundary of a two-month trading range, providing a safety net for bulls. Although trading volumes have been thin due to the holiday season, market activity is expected to pick up as foreign institutional investors return to their desks, potentially breaking the current range-bound movement.
The new year's start was notably dampened by a sharp decline in ITC, which single-handedly shaved off 100 points from the Nifty. The conglomerate’s shares faced a steep 10 per cent Intraday crash following the government's announcement of a new excise duty on cigarettes, effective February 1, 2026. This Tax hike, ranging from Rs 2,050 to Rs 8,500 per 1,000 sticks, has triggered a wave of downgrades and target price cuts by analysts who fear a significant impact on the company's operating margins and cigarette volumes. While ITC struggled, the broader market found some solace in the Banking sector; despite a lacklustre performance from ICICI Bank, the Nifty Bank managed to sustain above the critical 59,500 level.
Focus has shifted toward mid-cap financial names and the automotive sector following recent business updates. PSU lenders like Punjab & Sind Bank reported a healthy Q3 update with total business growing 11.84 per cent year-on-year to Rs 2.49 lakh crore, leading to a 2 per cent jump in their share prices during early Friday trade. Simultaneously, the auto sector is reacting to December sales data. Bajaj Auto reported a 14 per cent year-on-year increase in total sales at 3.69 lakh units, though this slightly missed some analyst estimates. Other key players like Maruti and Mahindra & Mahindra saw gains of up to 1.4 per cent, supported by strong passenger vehicle demand and optimistic macroeconomic indicators.
On the currency front, the Indian rupee showed signs of recovery, opening at 89.93 against the US dollar compared to its previous close of 89.96. The currency's slight appreciation of 6 paise in early trade reflects a breather after a volatile 2025. Investors are now closely monitoring foreign portfolio investor (FPI) activity, as their return is deemed crucial for sustaining the market’s upward trajectory. With December GST collections showing a 6.1% year-on-year growth to Rs 1.75 lakh crore and the Q3 earnings season around the corner, domestic fundamentals continue to be the primary driver for Indian equities amidst a quiet global backdrop.
Indian equity markets are poised for a constructive start this Friday, with the Sensex and Nifty 50 expected to open in positive territory. This optimism is fuelled by steady global signals and a 41-point gain in the Gift Nifty, which is currently trading around the 26,330 level. Supporting the domestic sentiment is the latest fiscal data showing that India’s GST collections rose 6.1 per cent year-on-year to Rs 1.75 lakh crore in December 2025, driven by robust imports and internal economic momentum. While Foreign Institutional Investors (FIIs) began the 2026 trading year as net sellers—offloading Rs 3,268.60 crore—Domestic Institutional Investors (DIIs) provided a cushion by purchasing Rs 1.525.89 crore in equities.
The market enters today's session following a relatively flat performance on New Year's Day. On Thursday, the Nifty 50 stayed nearly unchanged at 26,146.55, while the Sensex saw a minor dip to 85,188.60. Despite the narrow movement in the main indices, sectoral performance was largely positive, with nine out of eleven indices ending higher. The Auto, Realty, and IT sectors showed strength, whereas the FMCG sector faced its sharpest decline since early 2022. Notably, market volatility remained historically low, with the India VIX closing near 9.2, and Mid-Cap stocks continued to outperform their Large-Cap peers.
Internationally, the landscape is shaped by a weakening US Dollar and rising commodity prices. The US Dollar Index has slipped to 98.18, allowing the Indian rupee to strengthen slightly to 89.96 against the greenback. Investors are currently adopting a "wait-and-watch" approach regarding interest rate signals. Meanwhile, safe-haven assets are seeing a massive surge; gold has reached unprecedented highs near $4,346 per ounce, and silver has jumped over 2 per cent. In the energy sector, oil prices remain stable but cautious, with Brent crude hovering around $60.88 as traders balance supply concerns against a moderate global demand outlook.
Disclaimer: The article is for informational purposes only and not investment advice.