For equity investors, the policy message is likely to reinforce preference for capital-goods, construction, metals and infrastructure-linked stocks
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Indian equities are heading into the Union Budget with expectations of a steady fiscal stance and a renewed push on capital expenditure, as investors position for infra-linked earnings growth amid limited room for fresh stimulus.
Market participants broadly expect the government to stick to its fiscal consolidation path, with the FY27 deficit likely to be set in the low-4 per cent range of GDP even as gross market borrowing remains elevated to meet heavy bond redemptions and sustain infrastructure outlays.
“The upcoming Budget is expected to take a steady and disciplined approach. We see the FY27 fiscal deficit at around 4.3 per cent of GDP, with the government remaining committed to its medium-term 50 ± 1 per cent debt-to-GDP target. Gross market borrowing is likely to stay elevated at roughly ₹16 lakh crore, reflecting heavy redemptions and a continued focus on capex,” said Churchil Bhatt, Executive Vice-President – Investment, Kotak Mahindra Life Insurance.
For equity investors, the policy message is likely to reinforce preference for capital-goods, construction, metals and infrastructure-linked stocks, which stand to benefit directly from continued public spending on roads, railways and manufacturing capacity. With committed revenue expenditure already absorbing a large share of government receipts, economists see little headroom for broad consumption-boosting measures this year.
Export support
Instead, markets are tracking targeted support for export-oriented sectors facing global headwinds, alongside incentives tied to manufacturing and employment schemes that could support earnings visibility in select segments.
“The need of the hour is to encourage both government and private sector capex. Some tax relief measures for sovereign funds investing in India could also serve as a strong catalyst. Financials and pharma remain well placed, while metals may continue to perform but are running a bit ahead of fundamentals,” said Arpit Jain, Joint MD at Arihant Capital Markets Ltd.
Tax reforms aimed at improving ease of doing business could also influence sentiment, particularly for mid-caps and deal-driven sectors. “On the ease of doing business front, industry is looking for greater tax clarity and simplification, from rationalising multiple TDS rates and extending deductions for research and development, to linking buyback taxation with accumulated profits,” said Abhishek Mundada, Partner, Dhruva Advisors, adding that clearer rules could reduce disputes and encourage corporate restructuring.
Start-ups’ demand
Start-ups and technology firms are watching out for deferment in taxation on employee stock options until the point of sale to avoid double taxation. There is also a request to align capital gains tax treatment for unlisted shares with that of listed ones. “Start-ups are riskier, less liquid and demand longer holding periods — yet are taxed more harshly. Correcting this imbalance is critical to encourage private capital into India’s innovation economy,” said Devansh Lakhani, Director, Lakhani Financial Services.
Real estate-linked stocks may also be in focus if the Budget delivers relief for homebuyers. There is also demand for taxation rationalisation for real estate AIFs, and an emerging framework for asset tokenisation.
Published on January 26, 2026
