HDFC Asset Management Company's Managing Director and CEO Navneet Munot has expressed strong confidence in India's structural growth story, describing the country as a "stock picker's paradise" ahead of Budget 2026. Speaking at the ET Budget Boardroom event in Mumbai, Munot emphasized the importance of policy continuity and sustained reforms in maintaining India's growth momentum.

Policy Continuity and Reform Momentum

Munot praised the government's consistent approach, highlighting that Budget 2026 marks the ninth consecutive budget presentation by Finance Minister Nirmala Sitharaman. He noted that the government has maintained reform momentum without waiting for Budget Day, implementing measures across GST simplification, labour codes, and other structural improvements.

The HDFC AMC chief emphasized that despite global uncertainties, India has continued growing at over 8%, demonstrating resilience in challenging international conditions. He particularly commended the government's decision to present the budget on a Sunday, viewing it as a symbol of the administration's commitment to working continuously for national development.

Market Performance and Investment Flows

Addressing market dynamics, Munot highlighted several key trends shaping India's investment landscape:

Munot acknowledged that while Indian markets have underperformed some global markets due to the AI investment chase, he believes India will emerge as a significant beneficiary in the AI ecosystem. He positioned India as potentially becoming the "use-case capital of the world" for AI applications, creating substantial opportunities for corporate productivity enhancement and market expansion.

Sectoral Opportunities and Manufacturing Focus

The fund manager emphasized India's diverse investment opportunities across sectors, driven by an economy serving 1.4 billion consumers. He highlighted government initiatives supporting manufacturing growth:

• Corporate tax reduction measures
• Production Linked Incentive (PLI) scheme implementation
• Logistics infrastructure improvements
• Indigenization and procurement from Indian companies
• Energy transition and EV adoption initiatives
• Semiconductor manufacturing promotion

Munot stressed that these measures across manufacturing, energy transition, and new-age technologies position India to participate in multiple growth opportunities spanning various sectors.

Budget Expectations and Policy Recommendations

The HDFC AMC CEO outlined three key expectations from Budget 2026:

Munot particularly emphasized the potential of unlocking trillions of dollars currently locked in physical assets like gold and silver, noting that India imports large quantities of these metals annually. He suggested fiscal incentives could redirect this wealth toward capital markets, benefiting overall economic growth.

Future Growth Drivers

Looking ahead, Munot expressed confidence that continued government focus on capital expenditure, fiscal consolidation, and RBI support through liquidity measures and interest rate adjustments will collectively drive higher earnings growth. He emphasized that India's structural advantages, combined with ongoing reforms and the potential AI revolution, create a favorable environment for long-term investment opportunities across multiple sectors and market segments.

Jaspreet Singh Arora, Chief Investment Officer at Equentis Wealth Advisory Services, expects the upcoming Union Budget to be reform-oriented within tight fiscal constraints, projecting an 11-13% increase in capital expenditures. He anticipates a "continuity budget" that reinforces existing successful policies while pushing India toward becoming a manufacturing powerhouse.

Budget Expectations and Fiscal Strategy

Arora expects the government to pause further fiscal consolidation, maintaining the deficit near 4.4% of GDP while re-orienting spending toward capex and development outlays. The budget is likely to focus on:

• Manufacturing incentives: Enhanced support for AI and semiconductors
• Sunrise industries: Major push for defence, electronics, AI, nuclear energy, and critical minerals through PLI schemes
• Long-term fiscal health: Targeting debt-to-GDP ratio reduction from 81% currently to about 50% by FY31

Market Challenges and Global Factors

According to Arora, President Trump's tariff policies represent the foremost short-term threat to equity markets, triggering widespread global trade disruptions. This has resulted in significant foreign institutional investor (FII) selling, with over Rs 40,000 crore offloaded from Indian markets in January 2026 alone. The rupee's depreciation to record lows near 91.97/USD has further intensified capital flight and increased importer hedging costs.

To counter tariff impacts, the government is pursuing a "diversify and defend" strategy, including fast-tracking trade deals with the UK, Oman, and the anticipated EU agreement. The Export Promotion Mission with an outlay of Rs 25,060 crore is being introduced to mitigate tariff impacts.

RBI Policy Outlook

Arora believes the RBI will prioritise liquidity support and rate transmission over outright monetary easing in its February policy meeting. Despite approximately 125 basis points of cumulative cuts, 10-year G-sec yields have barely declined, indicating weak transmission. Current market assumptions point to only a terminal 25 basis point cut.

The central bank has stepped up open market operations and conducted variable rate repo auctions to manage tight system liquidity, while using USD/INR swap windows to offset liquidity drains from forex market interventions.

Sector-Specific Outlook

For the IT sector, Arora considers this an opportune time for accumulation, with Nifty IT valuations at a reasonable P/E of around 27x, down from December 2024 peaks of 37x. AI-driven deal ramp-ups are gaining pace, and analysts forecast 6-8% USD revenue growth into FY27, significantly ahead of prior consensus estimates of 3-4%.

Regarding targeted relief measures, markets are not expecting massive giveaways but rather focused support through tax credits and incentives for MSMEs and export-heavy sectors affected by tariff pressures.