With just 8 days remaining until Union Budget 2026, market sentiment on Dalal Street reflects cautious optimism rather than the traditional pre-budget excitement. The Nifty has already declined by more than 1.80% in January, adding to investor anxiety about potential deeper corrections ahead of the February 1 budget announcement.

Historical January Performance Weighs on Sentiment

Market data reveals a concerning pattern for investors during the budget season. Over the last 10 years, both Nifty and Sensex have delivered negative returns in January on 8 occasions, with January and February frequently disappointing investor portfolios. This historical trend, combined with current market conditions, has dampened expectations for a robust pre-budget rally.

India's fiscal position adds another layer of complexity to budget expectations. The country's fiscal deficit has already reached nearly 62% of the FY26 target, significantly limiting the government's room for aggressive spending announcements that typically drive market enthusiasm.

FII Selling Pressure Dampens Rally Prospects

Vinayak Magotra, Product Head & Founding Team at Centricity WealthTech, highlighted the unprecedented selling pressure from foreign investors. "There has been persistent and aggressive FII selling that has clearly weighed on sentiment, with last year witnessing withdrawals of nearly ₹3 lakh crore and the current year beginning on a similarly defensive note," Magotra explained.

The positioning data reveals FIIs are heavily net short in index futures, indicating that any market rallies are being actively sold into, particularly at higher levels. This selling pressure has contributed to sharp corrections across key large-cap stocks including Reliance, L&T, and TCS, suggesting institutional support remains weak at current valuations.

Global Headwinds Add Market Complexity

Current market conditions differ significantly from previous budget cycles due to elevated global uncertainties. Geopolitical tensions, US tariff uncertainties, high bond yields, and ongoing trade conflicts have created a more complex investment environment. "Markets are far more sensitive to global developments than domestic policy headlines right now," Magotra noted.

These global factors have made investors more cautious about domestic policy announcements, potentially reducing the traditional impact of budget-related market movements.

Potential Budget Catalysts for Sector-Specific Moves

Despite the challenging environment, certain budget announcements could still generate short-term market excitement in specific sectors:

"Any signal around rural income support, agriculture spending or fertiliser subsidies tends to move these stocks quickly. Overall, the budget can trigger sector-specific moves, but markets will quickly shift focus back to fiscal deficit, government capex, earnings and global cues," Magotra explained.

Investment Strategy Recommendations

Given the current market environment, experts recommend a measured approach to budget-related investment decisions. "Investors should align portfolios with their long-term asset allocation and risk tolerance, rather than trying to predict budget outcomes," Magotra advised.

Event-driven, short-term trades are best avoided as expectations are often already priced into market valuations, and immediate reactions can prove volatile and misleading. Instead, any budget-related volatility should be used for portfolio rebalancing rather than speculation.

Market-Friendly Budget Expectations

A truly market-friendly budget in 2026 would focus on avoiding negative surprises while providing targeted support to key sectors. Infrastructure, renewables, manufacturing, and defence sectors could benefit from continued government emphasis on capital expenditure and self-reliance initiatives.

Export-oriented sectors may also receive attention if the government addresses delays in India-US trade negotiations. However, capital market-specific relief measures, such as rationalization of Securities Transaction Tax or capital gains taxes, may improve sentiment only marginally unless accompanied by broader macroeconomic triggers.

India's gender budget allocation for FY26 has jumped 37% year-on-year to ₹4.49 lakh crore, spanning 49 ministries and departments, as policymakers intensify focus on women's empowerment. However, labour market data reveals a persistent gap between fiscal commitment and workforce outcomes, raising questions about the effectiveness of budget allocations alone in addressing gender inclusion challenges.

Workforce Participation Data Reveals Structural Challenges

Despite increased government focus, labour market statistics highlight ongoing disparities in women's workforce participation. The data shows that India's total workforce expanded by 6% in FY25, while women's employment grew by a modest 7% - a gap considered too narrow to drive meaningful scale in participation rates.

More than half (52%) of NSE-listed companies continue to employ fewer than 10% women, even as India positions itself as the world's fastest-growing large economy. This corporate representation data underscores the challenge of translating policy initiatives into workplace outcomes.

Sectoral Progress Shows Mixed Results

Sector-wise analysis reveals varying levels of progress in women's workforce participation across different industries. The Udaiti CGG Dashboard data for FY24-25 shows notable improvements in specific sectors while others remain stagnant.

The healthcare and consumer services sectors demonstrate positive momentum, while banking and financial services show limited progress in women's representation.

Economic Impact and Growth Implications

The World Bank's Managing Director of Operations, Anna Bjerde, has indicated that raising female labour force participation to 50% could add 1 percentage point to India's GDP growth. This projection highlights the economic significance of addressing gender workforce gaps as India works towards high-income status by 2047.

At the current pace, India faces challenges in meeting its ambition of raising female labour force participation to 70% by 2047, a target considered critical for inclusive and sustained growth. The Ministry of Labour and Employment Secretary, Sumita Dawra, has emphasized that higher women's participation remains central to long-term development objectives.

Gender Budget Structure and Implementation

The Gender Budget, introduced in 2005-06, enables gender-sensitive analysis of government programmes through disaggregated allocations. The budget structure includes three distinct categories:

• Part A: Schemes with 100% provision for women
• Part B: Schemes with 30-99% allocations for women
• Part C: Introduced in July 2024 Budget, covering schemes with up to 30% allocations

While allocations have crossed the ₹3.00 lakh crore mark for the first time, reaching ₹4.49 lakh crore for FY26, experts emphasize the need for clearer rationale on fund utilization towards gender equity and better outcome tracking mechanisms.

Private Sector Role and Leadership Gaps

Corporate leadership data reveals significant representation challenges at senior levels. The Hurun India Uth Series, recognizing accomplished entrepreneurs under 40, features just 36 women compared to more than 400 men. This disparity reflects how workforce participation gaps translate into leadership and wealth disparities.

Women's representation in corporate boardrooms remains below 20% in India, compared to 33-40% in European countries. Venture capital firm Epiq Capital notes that European progress resulted from regulatory intervention rather than organic change, suggesting the need for sustained public and regulatory support.

Implementation Success Stories

District-level diagnostics in Uttar Pradesh and shop-floor reforms in companies such as Dr Reddy's and Mahindra Swaraj have demonstrated measurable progress. These interventions have driven a 13-fold increase in women's participation over a decade, showing that systemic change can scale when policy, data, and employer incentives align effectively.