Last week was one of those rare periods in the market when silence spoke louder than noise. Throughout the week, the index repeatedly tested both sides of a tight band, settling in red zone in four out of five sessions, but failed to commit decisively in either direction.

The Nifty spent the week locked in a tight 321-point range, facing persistent resistance near 26,000–26,050 and steady buying interest around 25,700–25,800.

“The benchmark index Nifty traded within a narrow range of just 321 points, which was the tightest weekly range recorded since the first week of October,” said Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities.

Despite the narrow weekly range, volatility stayed elevated, with the Nifty opening every session with a gap-up or gap-down. The week started on December 15, when the index tested higher levels, hitting 26,047, before easing to close at 26,027. On December 16, a gap-up opening quickly gave way to selling pressure, dragging Nifty to a low of 25,834 and a close of 25,860, the steepest decline of the week.

Uncertainty continued on December 17 and 18, as the index swung intraday but finished nearly flat, repeatedly failing to hold above 25,900 while finding consistent support in the 25,726–25,770 zone. The tone improved slightly on December 19, with Nifty recovering through the session to close at 25,966, up 0.58%, giving buyers a modest edge into the week’s close.

“This combination of high volatility and narrow range clearly reflected a phase of indecision, with both bulls and bears refraining from taking aggressive positions. Eventually, the index settled at the 25966 level and formed a small-bodied candle with shadows on either side — a structure that often precedes a decisive directional move, raising an important question about what the market is preparing for next,” Shah said.

Key levels to watch for Sensex, Nifty

From a tactical standpoint, for Nifty, the 26,050–26,100 zone has emerged as the immediate hurdle for Nifty. A sustained move above this band could trigger a swift rally toward 26,300 and potentially 26,500 in the short term. On the flip side, the 25,770–25,700 region, backed by the prior swing low and the 50-day EMA, is expected to act as a strong support zone. This narrow corridor has now become the market’s immediate battleground, said Shah of SBI Securities.

Sensex mirrored Nifty’s behaviour, consolidating within a tight 1,040-point range — among the narrowest seen in recent weeks. On the weekly chart, the index printed a Doji candle, reinforcing the theme of indecision.

Encouragingly, Sensex has managed to stay above its key short- and long-term moving averages and has formed a double-bottom pattern on the daily chart. However, momentum indicators remain muted. The RSI continues to hover in a narrow band, the stochastic oscillator is flat, and the MACD histogram remains below zero — all pointing to a lack of decisive momentum.

A breakout above the 85,300–85,400 zone could change this narrative quickly, opening the path toward 86,000 and 86,500. Until then, the 50-day EMA near 84,300–84,200 is expected to act as a critical support cushion.

Bank Nifty: Waiting for direction

Bank Nifty spent the week locked in an even tighter range of just 820 points — its most compressed weekly movement since late October. The weekly Doji formation reflects a stalemate between buyers and sellers.

The index continues to hover around its 20-day EMA, which has flattened due to prolonged consolidation. Momentum indicators echo this sideways bias. For now, 58,600–58,700 remains a key support zone, while 59,400–59,500 stands out as a stiff resistance. A convincing breakout above 59,500 could quickly propel the index toward 60,200.

Within the banking space, PSU banks and select mid-sized private banks appear better positioned for relative outperformance.

What could break the deadlock?

Markets are now looking for a trigger — and several are lining up. The biggest near-term catalyst is clarity on the India–US trade agreement. Any positive development could significantly boost sentiment and provide directional cues.

Beyond that, attention will shift to Q3FY26 business updates and the start of the IT earnings season in January. Given the sector’s heavy index weight, IT results could play a decisive role in shaping market direction as the new year unfolds.

Sectoral and stock-specific trends

Technically, Auto, IT, Metal, and PSU Bank indices continue to show relative strength and are likely to outperform in the near term. In contrast, FMCG and Media are expected to lag, suggesting limited upside in the short run.

On a stock-specific basis, names such as KEI Industries, Paytm, Samvardhana Motherson, TVS Motor, JK Tyre, CEAT, APL Apollo Tubes, and Bharat Forge are displaying strong technical setups, trading above key moving averages with improving momentum.

Among all sectors, IT stands out. Nifty IT has consistently outperformed the broader market, with its relative strength ratio touching a 108-day high. The index is comfortably placed above all major moving averages, which are now trending upward, reinforcing a well-established bullish structure.

“Over the last few weeks, Nifty IT has consistently outpaced the frontline indices, and this leadership is also reflected in the ratio chart, which has climbed to a 108-day high and continues to trend higher—signalling sustained relative outperformance against the broader market,” Shah said.

With momentum indicators firmly aligned with price action, IT appears well-positioned to extend its leadership in the sessions ahead.