Dalal Street appears to be heading toward its most challenging beginning in a decade, with all attention now firmly fixed on the government's forthcoming Budget announcements. As equities, the rupee, and bonds collectively face significant pressure, a growing number of investors are turning their hopes toward the Union Budget 2026 for decisive measures that could rejuvenate confidence and propel economic growth forward.
Market Performance Under Strain
So far this year, Indian equity benchmarks have experienced a sharp decline of almost 4%, representing the NSE Nifty 50 Index's poorest start since 2016. Foreign investors have persistently reduced their exposure to local shares, while an overwhelming supply of bonds has further burdened debt markets. This widespread sell-off has erased approximately $360 billion in market value this month alone, according to data compiled by Bloomberg.
Budget Expectations and Economic Stimulus
The current focus revolves around whether the government will choose to increase defence spending and advance stake sales in state-run enterprises to bolster revenues. This follows last year's announcements of income-tax cuts and reduced consumption levies. Market participants view these potential actions as crucial levers that could uplift sentiment across various asset classes.
Abhishek Banerjee, chief executive of LotusDew Wealth and Investment Advisors, shared his insights with Bloomberg, stating, "The budget is likely to aim at stimulating the economy, which means additional measures to boost consumption and push domestic manufacturing."
Sectors to Watch Closely on February 1
Government Companies
This Budget will particularly highlight the measures the government plans to implement for accelerating share sales starting from the upcoming financial year. The government must reduce its shareholding in Life Insurance Corp, the nation's largest insurer, to comply with public float norms and has already secured regulatory relief. With deadlines approaching, a stake sale might be considered in the fiscal year ending March 2027. IDBI Bank Ltd. is also expected to remain in the spotlight as advancements continue on its long-anticipated privatisation.
Defence Sector
The defence sector has emerged as another critical area amidst broader market weakness. India's initiative to expand domestic defence manufacturing has elevated select stocks, with the NSE defence index more than tripling over the past three years. According to Nirmal Bang Institutional Equities, the sector budget is close to 7 trillion rupees for fiscal 2026 and is projected to grow between 10% and 15%. Shares of Bharat Electronics Ltd. have surged more than fourfold during this period, while Solar Industries India Ltd. and MTAR Technologies Ltd. are also being closely monitored by investors.
Infrastructure Sector - Roads and Railways
Infrastructure spending, especially on roads and railways, is anticipated to remain a top priority in the budget. Both segments have already absorbed a substantial portion of last year's allocations and are widely expected to receive increased funding. Continued investment in modernising the railway network, with a strong emphasis on safety, speed, and passenger comfort, is likely to feature prominently. Larsen & Toubro Ltd. and state-owned BEML Ltd. are among the companies identified as key beneficiaries.
Brokerages
Capital market-linked stocks represent another area under close observation. Shares of brokerages, exchanges, and market service providers declined last year amid overall market weakness. Consequently, any modifications to capital gains taxation in the budget could have immediate repercussions for trading activity, as noted by strategists at Citigroup Inc.
Disclaimer: Recommendations and views on the stock market, other asset classes, or personal finance management tips provided by experts are their own. These opinions do not represent the views of The Times of India.
