Budget 2026: Union Budget is a major event for investors and can significantly impact stock market sentiment as it shapes the economic environment of the country through policies, taxation, and even narratives.
Union Finance Minister Nirmala Sitharaman will present her ninth consecutive Budget today (Sunday, February 1).
The Indian stock market is also open today, so investors and traders can align their strategies with policy announcements.
Union Budget: What can drive the market?
Experts say the market doesn’t have high hopes from the Budget, even as it expects policy continuation on fiscal prudence, infrastructure, manufacturing, and capital expenditure (capex).
“We expect the budget to be a low-impact event for Indian equities. Growth stimulus is already in play, and the space for further positive impulses is limited,” said brokerage firm Emkay Global.
Since the capex base is already high, there may be a modest increase in government capex. However, some sectors, such as defence and railways, may see higher allocation.
On the income tax front, there is limited scope for further cuts even as direct tax receipts stay on track despite last year’s changes in slabs and rates.
As Mint reported, quoting official data released on January 12, the government’s direct tax receipts after adjusting for refunds grew 8.8% in the period from April to January 11 to ₹18.37 trillion, nearly three-fourths of the full-year target.
Any positive surprise on these fronts will move the market. Moreover, changes in LTCG tax will likely be a strong boost to market sentiment.
“Investors don’t have expectations of any tax reliefs in this Budget. If there is an increase in exemption for long-term capital gains from ₹1.25 lakhs presently to a higher limit, that would be a positive,” said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
“From the market perspective, a fiscally prudent, growth-oriented Budget is desirable. There are rumours of exemption from long-term capital gains tax for certain categories of FIIs. If this happens, it can trigger a rally in the market,” Vijayakumar said.
Sector-wise, increased allocation to infrastructure and affordable housing can boost infra, cement, and select housing finance stocks.
“The composition of capex spend will be the key factor to watch. We expect positive outcomes for railways, defence, auto ancillaries, and EMS, while jewellery, life insurance, and housing finance may take marginal hits,” said Emkay Global.
Brokerage firm Nuvama Wealth Management said the acceleration in development spending and capex is welcome, but may be insufficient to stall the earnings downgrade cycle, as margins are poised for mean reversion and external headwinds still loom large.
Hence, unless there is a larger growth impulse, defensive bias is warranted. Tweaks on capital gains taxes could sway sentiments in the near term, said Nuvama.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
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