Pulse of the Street: Markets glide into 2026 as metals, autos lead the charge

The Nifty 50 index touched an intraday high of 26,340 points, fuelled by a broad-based rally led by metals, power, and automobile stocks, before closing the week at 26,328.55 on Friday. The index gained 1.1% over the week, while the BSE Sensex rose 0.85%, closing at 85,762 points.

The gains were driven by a mix of steady buying and short covering, which helped the benchmarks extend their winning streak for a third consecutive session, experts said. Mid- and small-cap stocks rose alongside the major indices, signalling a wider participation beyond benchmark heavyweights. Strength in sectors such as autos and other cyclicals helped offset muted global cues amid holiday-thinned overseas markets.

Although investors bought stocks across most sectors, a clear divide emerged, with cyclical stocks seeing steady demand while defensive sectors lagged. Metals topped the charts for a second straight week, rising nearly 6%, as the government’s decision to extend safeguard duties on steel till April 2028 removed policy uncertainty and improved margin visibility for domestic producers. Power stocks followed with gains of nearly 4%, while strong domestic automobile sales helped the sector post similar returns. On the flip side, fast-moving consumer goods emerged as the biggest laggard during the week, sliding about 3.5%, weighed down by ITC Ltd’s sell-off after the recent tax hike on cigarettes.

Globally, Indian equities lagged their East Asian peers, with the South Korean and Taiwanese markets outperforming sharply, posting weekly gains of about 4% and 3%, respectively. The divergence was driven largely by valuation-led sector rotation and strong rallies in technology and semiconductor stocks in those markets, where India has limited representation, said Robin Arya, founder of GoalFi, a Securities and Exchange Board of India-registered corporate research analysis firm. Heavy foreign outflows and a weaker rupee have further capped India’s relative performance, pointing to tactical reallocation rather than a structural shift away from Indian equities, he said.

Against this backdrop, several key developments triggered sharp stock-specific moves, shaping sectoral trends and overall market sentiment through the week. Ola Electric Mobility rose about 13% during the week after government's vehicle registry portal Vahan's data showed its market share climbed to 9.3% in December from 7.2% in November, signalling strengthening demand in the electric vehicle segment.

“Ola’s rise added to the broader optimism around electric vehicles and the future of mobility, which seems to have lifted sentiment across the (auto) sector," said Arya.

Meanwhile, Fast-moving consumer goods major ITC slid 13% after the government raised the effective tax burden on cigarettes to 61% from 50%, rekindling concerns over potential volume and market share losses. Analysts expect cigarette prices to rise 23-50% and volumes to decline about 12.5% in FY27, with the risk of market share erosion to illicit trade weighing on ITC’s medium-term profitability.

Vodafone Idea also fell 1.3% this week as the government slapped a goods and services tax penalty of almost ₹80 crore. Quick service restaurant operators Devyani International and Sapphire Foods India also came under focus as Devyani announced their long-anticipated $934 million merger on Thursday.

What’s next?

For the week ahead, investors will keep an eye on global inflation data, central bank commentary, FPI (foreign portfolio investment) flows, and early signals around the Union budget, said Arya. Mint’s analysis shows that the equity market has typically corrected in the run-up to the budget: in the last 10 years, Indian equities fell in one month preceding the budget.

This pattern reflects recurring pre-budget nervousness driven by uncertainty around fiscal stance, taxation changes, and policy surprises, said Arya. Current positioning suggests that this pre-budget caution is resurfacing, with foreign investors staying guarded while domestic flows rotate selectively into sectors such as railways, infrastructure and capital goods rather than a broad risk-on trade, he added. Investor focus is now set to shift toward upcoming quarterly earnings updates as the next key triggers for the market.