Trade Setup for January 5: Will geopolitical tensions act as a dampener to Nifty upmove?

The benchmark indices scaled fresh peaks on Friday, with the Nifty reclaiming and holding above the 26,325 mark as it logged its third straight session of gains. The index broke past the key resistance band of 26,200 to 26,300 and surged to a new all time high of 26,340 during the session.

After opening on a mildly positive note, the market built on its momentum through the early and mid part of trade. A brief dip towards the close was quickly bought into, allowing the Nifty to finish near the day’s highs.

The index settled 182 points higher at a record closing level of 26,328.

Coal India, NTPC and Hindalco emerged as the top gainers on the Nifty, while ITC, Kotak Mahindra Bank and Nestle India weighed on the index.

Sectorally, barring FMCG, all indices ended in positive territory, with Realty, PSU Bank and Metal stocks leading the rally.

The broader market continued to outperform. The Nifty Midcap 100 rose 1% to close at an all time high, while the Nifty Smallcap index gained 0.70%.

On the policy front, the Ministry of Electronics and Information Technology cleared 22 proposals under the Electronics Components Manufacturing Scheme, involving estimated investments of ₹41,863 crore and projected production worth ₹2.58 lakh crore.

Macro data showed December GST collections rising 6.1% year on year to ₹1.75 lakh crore, although higher refunds led to a decline in net domestic collections.

Meanwhile, geopolitical risks resurfaced at the start of 2026 after the US launched land strikes on Venezuela, leading to the capture of President Nicolas Maduro and his wife.

The escalation is expected to have implications across asset classes, including crude oil and precious metals, given Venezuela’s large oil reserves and presence of gold and other metals.

Wall Street could see an initial negative reaction as the US is directly involved in this conflict, unlike the Russia Ukraine or Israel Iran situations seen in 2025.

US equities had entered 2026 after three consecutive years of double digit gains, and any sharp reaction there could spill over to global markets.

On the technical front, Nagaraj Shetti of HDFC Securities said the next upside target over the next one to two weeks is seen around 26,750, while immediate support is placed near 26,200.

LKP Securities’ Rupak De said the near to short term trend remains firm, with a buy on dips strategy favouring bulls as long as the index stays above 26,000. He added that a decisive move beyond 26,350 could push the Nifty towards 26,600 in the short term.

Centrum Broking’s Nilesh Jain said the index is trading above all key short and long term moving averages, keeping the broader trend positive. With the base shifting higher to the 26,100 zone, he sees room for the Nifty to head towards 26,500 in the near term.

Nandish Shah of HDFC Securities said that the Nifty has convincingly crossed its earlier swing highs at 26,236 and 26,325, indicating a strong breakout from its consolidation phase.

With the index now in uncharted territory, he said the near term upside opens up towards 26,500 and higher, while immediate support has moved up to around 26,100, which could cushion any short term declines.