NewsStocksBudget 2026: Market Expert Advises Caution as Pre-Budget Rally Unlikely, Focus on Defence and InfrastructureBudget 2026: Market Expert Advises Caution as Pre-Budget Rally Unlikely, Focus on Defence and Infrastructure
Atul Parakh of Bigul advises investors to avoid pre-Budget positioning ahead of Union Budget 2026, citing high-risk conditions and historical patterns of January market weakness. He expects no major tax relief measures as government focuses on fiscal consolidation with 4.4% deficit target for FY26. Key beneficiary sectors include defence, infrastructure, and textiles, with government capex projected to grow 10% year-on-year. Parakh recommends maintaining cash positions until post-Budget policy clarity emerges.
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Atul Parakh, CEO of Bigul, expects the upcoming Union Budget to present significant risks for investors, advising a cautious approach rather than anticipating any pre-Budget market rallies. His analysis suggests that current market sentiment remains subdued due to foreign portfolio investor outflows, global uncertainties, and Budget-related anticipation.
Historical Market Pattern Continues
The Indian stock market has demonstrated a consistent pattern of weakness ahead of Union Budget announcements. Historical data reveals that Nifty 50 has delivered negative returns in January during four of the last five years, with 2024 being the sole exception. This trend reflects typical profit-booking behaviour and policy uncertainty that characterises the pre-Budget period.
| Market Behaviour: | Pattern |
|---|---|
| Pre-Budget Performance: | Negative returns in 4 of last 5 years |
| January Trend: | Consistent weakness |
| Market Position: | Consolidation between 25,500-26,000 |
| Expected Volatility: | High during Budget speech |
Parakh anticipates this cautious trend will continue in January 2026, though selective opportunities may emerge following the Budget announcement. The market expert notes that pre-Budget rallies are unlikely, with volatility and selective buying in growth themes like infrastructure being more probable scenarios.
Budget 2026 Expectations and Fiscal Priorities
The expert does not expect major income tax cuts or significant changes in GST structure, as the government maintains focus on controlling fiscal deficit. Tax collections are projected to grow in line with economic expansion, but large tax relief measures appear unlikely given current fiscal priorities.
| Budget Focus Areas: | Details |
|---|---|
| Government Capex Growth: | ~10% year-on-year increase |
| Capex as % of GDP: | Close to 3.1% |
| Fiscal Deficit Target: | 4.4% for FY26 |
| Net Borrowing: | ₹11.50 trillion |
| Debt-to-GDP Target: | 50% by 2031 (from current 57%) |
The FY27 Budget is expected to prioritise capital spending, with government capex projected to rise by approximately 10% year-on-year while remaining close to 3.1% of GDP. This investment-led growth strategy focuses on defence, infrastructure-related manufacturing, power, nuclear energy, electronics, pharmaceuticals, and critical minerals.
Sector-Specific Opportunities
Parakh identifies three key sectors positioned to benefit from Budget 2026 policies. Defence sector expectations centre around proactive capital expenditure following recent strategic developments, providing structural tailwinds for the industry. Infrastructure investments are anticipated in futuristic areas including artificial intelligence, green hydrogen, and advanced semiconductor manufacturing to enhance global competitiveness.
Textiles sector may receive targeted financial support to offset tariff-related pressures, given the significant impact of recent tariff changes on industry performance. The expert recommends aligning investment strategies with capex-driven themes including defence, infrastructure, capital goods, power, and manufacturing-linked public sector undertakings.
Trading Strategy and Risk Management
For traders and investors, Parakh emphasises treating the Union Budget as a high-risk event requiring careful positioning. He specifically advises against buying naked options due to expensive premiums that typically deflate immediately after Budget announcements, potentially causing losses even with favourable market movements.
Key Trading Guidelines:
- Avoid pre-Budget positioning in volatile instruments
- Consider defensive sectors like FMCG if participation is necessary
- Focus on policy-driven themes including Defence, Railways, and Rural consumption
- Maintain cash positions until post-Budget clarity emerges
- Wait for decisive breakout from current consolidation zone
The expert's primary recommendation centres on capital preservation, suggesting investors sit with cash positions during the Budget speech and deploy funds only after policy direction becomes clear. This approach prioritises risk management over speculative positioning in an inherently uncertain environment.
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