Markets may appear volatile, but the current phase should be viewed as consolidation rather than a sign of deeper stress, according to Prashant Khemka, founder and MD of WhiteOak Capital Management. In an exclusive conversation with Moneycontrol, he outlined his expectations for the upcoming Union Budget and long-term market outlook.

Budget Focus on Structural Reforms

Khemka believes markets are less concerned about near-term earnings support and more focused on long-term intent from the Union Budget. He argues that incremental tax tweaks or sector-specific incentives may deliver only fleeting rallies, while investors are watching for a clear structural roadmap.

"What investors are watching for instead is a clear structural roadmap," Khemka emphasized, highlighting the market's preference for sustainable policy direction over short-term stimulus measures.

Three Key Priority Areas

Defence Spending Enhancement

Khemka identified sharply higher defence spending as a critical priority, noting that current expenditure remains around 2.00% of GDP. He advocates for substantial increases in defence allocation to strengthen strategic infrastructure.

"We need to substantially ramp up our defence budget. It has been stuck at around 2.00% of GDP for quite some time. While India has spent heavily on physical infrastructure, defence is the most critical form of infrastructure," he stated.

Given India's geopolitical position and regional challenges, Khemka suggests the country should be at the higher end of the 4.00-5.00% range that many countries globally are targeting.

Semiconductor Self-Reliance

The second priority focuses on reducing dependence on a handful of countries for critical imports, particularly semiconductors. Khemka highlighted India's significant lag in this sector, describing the country as "30 years behind in semiconductors, if not more."

"While initiatives such as the PLI scheme have helped us make a start over the past two to three years, what is needed is a massive push," Khemka explained. He advocates for government-backed semiconductor efforts, acknowledging that private capital alone may not bridge the existing gap.

Business Environment Reforms

The third priority involves deeper reforms to ease of doing business, particularly addressing land acquisition challenges and regulatory complexity. Khemka views these structural changes as essential for long-term economic growth and competitiveness.

Market Outlook and Performance

After delivering exceptional returns following the Covid-19 lows, Indian equities have largely moved sideways for the past 15-18 months. Khemka describes this period as "disappointing but normal," cautioning against over-interpreting short-term market movements.

Earnings Growth Expectations

Khemka expects FY26 earnings growth to remain in high single digits, with FY27 likely tracking nominal GDP growth in the low double digits. While near-term visibility remains mixed, he believes markets will reward credible structural reform even without immediate earnings upside.

"Markets don't follow the calendar," he noted, emphasizing that past returns offer little insight into future performance. His outlook suggests that sustainable policy reforms will drive long-term market performance more effectively than short-term fiscal measures.

Source: https://www.moneycontrol.com/news/business/markets/budget-should-explain-governments-long-term-structural-road-map-prashant-khemka-whiteoak-capital-13787859.html

A detailed economic analysis emphasizes the strategic importance of maintaining public capital expenditure focus in India's upcoming Budget 2026-27, highlighting infrastructure investment's proven multiplier effects and structural economic benefits.

Infrastructure Investment Delivers Strong Multiplier Effects

The analysis reveals that infrastructure spending generates significantly higher economic returns compared to consumption expenditure. While consumption spending typically delivers one-time benefits, infrastructure investment creates sustained economic impact through job creation, cost reduction, and productivity enhancement.

This multiplier effect stems from infrastructure's dual impact: immediate demand creation across multiple sectors during construction, followed by ongoing productivity improvements from completed assets.

Capital Expenditure Growth Shows Substantial Expansion

Central government capital expenditure has demonstrated remarkable growth trajectory, reflecting the administration's commitment to infrastructure-led development.

The substantial increase in capital allocation demonstrates the government's strategic positioning of infrastructure investment as the primary instrument for achieving ambitious economic targets.

Logistics Efficiency Improvements Exceed Expectations

Recent research has revealed significant improvements in India's logistics performance, contradicting earlier pessimistic assessments. A comprehensive study commissioned by the Department for Promotion of Industry and Internal Trade and conducted by the National Council of Applied Economic Research has provided updated logistics cost data.

These improvements reflect tangible benefits from sustained investment in highways, rail freight corridors, port modernization, and multimodal logistics infrastructure. The enhanced efficiency directly supports manufacturing and export competitiveness through reduced operational costs.

Private Investment Catalyzed by Public Infrastructure

Public infrastructure investment has demonstrated its effectiveness in stimulating private capital formation rather than crowding it out. Improved connectivity and reduced project risks have enhanced returns across multiple sectors:

• Manufacturing facilities benefit from better transport connectivity
• Logistics operations gain from improved rail and highway networks
• Renewable energy projects leverage enhanced power transmission infrastructure
• Data centers capitalize on improved digital backbone
• Urban services expand with better infrastructure foundation

This catalytic effect positions public capital expenditure as a strategic tool for anchoring long-term investment cycles and shaping positive market expectations.

Strategic Recommendations for Budget 2026-27

The analysis identifies three critical areas for optimizing infrastructure investment effectiveness in the upcoming budget:

High-Multiplier Focus Areas:

• Logistics infrastructure development
• Urban infrastructure expansion
• Power transmission networks
• Renewable energy integration
• Digital infrastructure backbone

Private Capital Integration:

• Enhanced public-private partnerships
• Strategic asset monetization programs
• Blended finance mechanisms

Execution Quality Improvements:

• Streamlined approval processes
• Milestone-linked funding mechanisms
• Enhanced monitoring systems
• Faster ground-level asset delivery

The expert analysis concludes that capital expenditure represents more than budgetary allocation—it constitutes a comprehensive economic strategy. As global growth faces uncertainty and domestic pressures mount, maintaining infrastructure investment focus provides stable economic anchoring while supporting long-term growth objectives. The approach signals policy continuity to markets and investors planning substantial capital commitments, reinforcing India's commitment to sustainable, inclusive economic development.