Domestic markets are likely to open on a flat note on Friday. Analysts expect the market to remain thin and lacklustre amid a lack of triggers.
Ponmudi R, CEO of Enrich Money, said US equities closed at record highs amid holiday-thinned volumes and growing expectations of further interest rate cuts by the US Federal Reserve, while a buoyant tone across Asian markets is providing a supportive global backdrop as Indian equities reopen after the Christmas break. While the medium-term structural outlook remains constructive, thin liquidity conditions and year-end book-squaring are likely to cap sharp directional moves in the near term, keeping investor sentiment cautiously optimistic at the open, with GIFT Nifty indicating a flat start around the 26,100–26,150 zone.
Ajit Mishra, SVP, Research, Religare Broking Ltd, said: “We maintain a positive bias amid the ongoing consolidation in the index and continue to recommend a ‘buy-on-dips’ approach as long as the Nifty holds its prevailing uptrend.” For fresh momentum, stronger participation from the banking index will be essential, with a decisive breakout above the 59,500 level likely to fuel the next leg of the up move, he added. Until then, participants are advised to adopt a stock-specific approach, focus on sectors showing consistent outperformance such as private banks, metals and auto, and adhere to disciplined risk management in the low-volume environment.
Global stocks in the Asia-Pacific region are trading in the green in early trade on Friday.
According to Motilal Oswal Financial Services, “As we enter 2026, Indian equity markets are trading close to all-time highs, with the Nifty ending CY25 with gains of nearly 10 per cent on a year-to-date basis.”
After a phase of consolidation in 2025, markets are expected to deliver steady growth in CY26, supported by a recovery in corporate earnings and a gradual revival in private sector investments. Recent and forthcoming government policy measures should further aid this recovery. The Union Budget 2026 will be a key event to watch, as it is likely to set the direction for FY2026-27.
From a valuation standpoint, the Nifty-50’s one-year forward P/E stands at 21.5x, around 4 per cent above its long-period average (LPA) of 20.8x. In comparison, valuations in the broader market remain elevated. The Nifty Midcap-100 and Nifty Smallcap-100 are trading at P/E multiples of 28.3x and 25.9x, representing premiums of about 26 per cent and 50 per cent over their respective long-term averages. “This suggests that large-cap valuations are relatively more reasonable after recent consolidation, while midcap and small-cap stocks warrant a more selective approach, with a focus on companies that have strong balance sheets, sustainable cash flows and clear earnings visibility,” it said.
India’s long-term structural growth story remains intact, supported by favourable demographics, rising digital adoption, increasing financialisation of household savings and continued reform momentum. The government’s ongoing policy initiatives will help reset the trajectory of corporate earnings over the medium term. Additionally, any resolution of the tariff stalemate with the US could act as an important external catalyst for markets, according to Motilal Oswal.
Meanwhile, trading in F&O signals a positive bias.
Dhupesh Dhameja, Derivatives Research Analyst, SAMCO Securities, said the derivatives landscape reflects a gradually strengthening neutral-to-positive bias. Put writers have continued to aggressively add fresh positions at at-the-money and nearby strikes, reinforcing a robust support base on every minor dip. Meanwhile, call writers have also added exposure near at-the-money strikes and at higher levels, indicating expectations of a broadly sideways-to-positive structure in the near term, he said.
A notable build-up of nearly 1.38 crore call contracts at the 26,200 strike has established this level as an immediate resistance zone. “On the downside, the addition of approximately 1.53 crore put contracts at the 26,000 strike has created a solid cushion. The Put-Call Ratio (PCR) has eased to 0.91 from 1.08, suggesting a mildly cautious undertone, while also highlighting that both bulls and bears are actively defending their respective levels,” he said.