Trade Setup for December 8: Nifty braces for volatility in trying to reclaim record levels as more IPOs open next week

Equity benchmark Nifty 50 extended its upward journey for the second straight session after the Reserve Bank of India (RBI) cut the repo rate by 25 basis points to 5.25%.

Despite the positive momentum, the index briefly snapped its three-week winning streak during the week with a marginal 0.06% dip on one of the sessions.

The market closed higher on Friday, lifted by the monetary policy outcome. In its latest meeting, the RBI reduced the repo rate from 5.5% to 5.25%, taking the cumulative easing in 2025 to 125 basis points.

The central bank also announced liquidity-boosting measures, including ₹1 lakh crore of OMO purchases in government securities and a three-year dollar-rupee buy-sell swap worth $5 billion to inject durable liquidity.

Banking and financial stocks led the advance within the Nifty 50, with Shriram Finance, SBI and Bajaj Finserv outperforming. On the flip side, Eternal, IndiGo and Trent witnessed selling pressure and ended among the key laggards.

Sectoral performance was mixed. Nifty Financial Services, IT and Auto closed with notable gains, while Media, FMCG, Consumer Durables and Pharma ended lower.

In the broader market, the tone stayed divergent, with the Nifty Midcap 100 rising 0.5% even as the Nifty Smallcap 100 fell 0.57%.

Defence stocks may remain in focus as Russian President Vladimir Putin meets PM Narendra Modi at the annual summit aimed at strengthening defence and trade ties. Any policy cues or agreements from the meeting could drive stock-specific action.

Market sentiment is expected to remain constructive, supported by the RBI's rate and liquidity moves, steady domestic inflows and growing expectations of a potential US Fed rate cut.

This week will also see the opening of five mainboard IPOs, ICICI Prudential Asset Management Co, Nephrocare Health Services, Park Medi World, Wakefit Innovations and Corona Remedies.

According to Nandish Shah of HDFC Securities, the Nifty has resumed its uptrend after reclaiming levels above its 5-day EMA near 26,100. Immediate resistance is seen around 26,300 and then 26,500, while the 25,950-26,000 band is likely to act as crucial support.

Sudeep Shah of SBI Securities said the 26,300-26,350 region, aligned with the previous swing high, will be a key resistance zone. A sustained move above 26,350 could pave the way for the index to test 26,500 and then 26,700. On the downside, the 20-day EMA around 26,000-25,950 remains an important support.

In the short term, the trend is expected to stay firm, with the Nifty having room to move towards 26,300/26,440, said Rupak De of LKP Securities, adding that support is placed at 26,060-26,000 and that buying on dips is likely to be favoured as long as the index holds above 26,000.

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