News Stocks Indian Equities Position for Union Budget with Focus on Fiscal Discipline and Infrastructure SpendingIndian Equities Position for Union Budget with Focus on Fiscal Discipline and Infrastructure Spending
Indian equity markets approach the Union Budget expecting fiscal consolidation with FY27 deficit projected at 4.3% of GDP and gross borrowing at ₹16 lakh crore. The policy focus on infrastructure spending is expected to benefit capital goods, construction, metals, and infrastructure sectors. Industry seeks tax reforms for ease of doing business, startup-friendly policies, and targeted support for export-oriented sectors amid limited scope for broad consumption stimulus.
*this image is generated using AI for illustrative purposes only.
Indian equity markets are entering the Union Budget period with clear expectations of fiscal discipline and continued infrastructure investment focus. Market participants broadly anticipate the government will maintain its fiscal consolidation trajectory while sustaining capital expenditure to drive infrastructure-linked earnings growth, despite limited scope for fresh stimulus measures.
Fiscal Policy Expectations
Market experts expect a steady and disciplined budgetary approach from the government. The fiscal framework is likely to reflect the administration's commitment to medium-term debt sustainability while accommodating necessary infrastructure investments.
| Parameter: | Projection |
|---|---|
| FY27 Fiscal Deficit: | Around 4.3% of GDP |
| Debt-to-GDP Target: | 50 ± 1% (medium-term) |
| Gross Market Borrowing: | Approximately ₹16 lakh crore |
"The upcoming Budget is expected to take a steady and disciplined approach. We see the FY27 fiscal deficit at around 4.3 per cent of GDP, with the government remaining committed to its medium-term 50 ± 1 per cent debt-to-GDP target. Gross market borrowing is likely to stay elevated at roughly ₹16 lakh crore, reflecting heavy redemptions and a continued focus on capex," said Churchil Bhatt, Executive Vice-President – Investment, Kotak Mahindra Life Insurance.
Sectoral Investment Implications
The anticipated policy direction is expected to reinforce investor preference for infrastructure-linked sectors. Equity investors are positioning for continued public spending benefits across key industrial segments.
Favored Sectors:
- Capital goods companies
- Construction firms
- Metals industry
- Infrastructure-related stocks
- Roads and railways beneficiaries
- Manufacturing capacity builders
With committed revenue expenditure already consuming a significant portion of government receipts, economists see limited room for broad consumption-boosting measures. Instead, markets are tracking targeted support for export-oriented sectors facing global challenges, alongside incentives for manufacturing and employment schemes.
Market Outlook and Investment Strategy
"The need of the hour is to encourage both government and private sector capex. Some tax relief measures for sovereign funds investing in India could also serve as a strong catalyst. Financials and pharma remain well placed, while metals may continue to perform but are running a bit ahead of fundamentals," said Arpit Jain, Joint MD at Arihant Capital Markets Ltd.
Industry Reform Expectations
Business leaders are anticipating tax reforms focused on improving ease of doing business, particularly benefiting mid-cap companies and deal-driven sectors. Industry stakeholders are seeking comprehensive tax simplification measures.
Key Reform Areas:
- Rationalizing multiple TDS rates
- Extending R&D deductions
- Linking buyback taxation with accumulated profits
- Reducing tax disputes through clearer rules
- Encouraging corporate restructuring
"On the ease of doing business front, industry is looking for greater tax clarity and simplification, from rationalising multiple TDS rates and extending deductions for research and development, to linking buyback taxation with accumulated profits," said Abhishek Mundada, Partner, Dhruva Advisors.
Startup and Technology Sector Demands
Startup companies and technology firms are particularly focused on taxation reforms related to employee stock options and capital gains treatment. The sector is seeking policy alignment to encourage private capital investment.
"Start-ups are riskier, less liquid and demand longer holding periods — yet are taxed more harshly. Correcting this imbalance is critical to encourage private capital into India's innovation economy," said Devansh Lakhani, Director, Lakhani Financial Services.
Real estate-linked stocks may also gain attention if the Budget delivers relief measures for homebuyers, along with taxation rationalization for real estate AIFs and frameworks for asset tokenization.
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