Week Ahead.....

The Nifty 50 sustained above 26,000, rising 388 points or 1.5 percent to hit a new closing high of 26,179, and the BSE Sensex closed above the 85,000 mark for the first time, climbing 1,028 points or 1.2 percent to 85,572. The broader markets continued to underperform benchmarks, with the Nifty Midcap 100 index gaining just 0.3 percent and the Nifty Smallcap 100 index falling half a percent.

A visible trend is that this rally was predominantly led by large-cap stocks, which are relatively fairly valued compared to mid and small caps, which are showing signs of exhaustion.

On the sectoral front, the focus could shift towards IT & banking space as companies would be releasing their pre-quarterly updates next week.

Going forward the overall sentiment may remain positive amid likely consolidation, with a focus on Manufacturing & Services PMI numbers, monthly auto sales, US jobs data, and Federal Reserve Chair Jerome Powell's speech in the coming truncated week.

Technically, the overall trend remains positive for the coming week given the continuation of higher highs-higher lows formation and Three White Soldiers formation, although initially some consolidation can't be ruled after the recent strong run-up taking the momentum indicator RSI (Relative Strength Index) near overbought levels on the daily and weekly charts, and given Long-Short ratio rising to nearly 80 percent. On the levels front, the 26,000 is an important support to watch next week, followed by 25,800 being the key support, while the 26,300 is expected to be immediate resistance followed by 26,500 being the key hurdle.

The weekly options data suggest that 26,000 is likely to be immediate support for the Nifty 50, followed by 25,500 being the key support, whereas, on the higher side, 26,400-26,600 is the area to watch.