As Finance Minister Nirmala Sitharaman prepares to present Union Budget 2026 on February 1, market analysts are tempering expectations for a broad-based pre-Budget rally. Current market performance reflects cautious sentiment, with Sensex dropping more than 250 points (0.3%) to close at 83,627.69 and Nifty 50 falling around 58 points (0.22%) to end at 25,732.30 on January 13.

Historical Pre-Budget Market Performance

Market data reveals a consistent pattern of cautious trading ahead of budget presentations. The performance leading up to Budget 2025 exemplifies this trend:

"Historical trends indicate that the Indian market typically underperforms in January preceding a budget, with the Nifty falling in four of the last five years due to profit-booking and policy uncertainty," said Santosh Meena, Head of Research at Swastika Investmart.

Selective Rally Expected Over Broad-Based Movement

Analysts emphasize that any pre-Budget positioning will likely be sector-specific rather than market-wide. Swapnil Aggarwal, Director at VSRK Capital, noted that investors can expect selective pre-Budget positioning rather than a broad-based rally.

Siddharth Maurya, Founder & Managing Director at Vibhavangal Anukulakara, explained that pre-Budget periods are characterized by higher market volatility rather than straight-line upward moves, as markets attempt to price in fiscal spending expectations. He identified potential buying opportunities in government focus areas including infrastructure, manufacturing, and consumption sectors.

"The market shall have to await the Budget measures to ensure that concerns on growth are dealt with and fiscal discipline is seen," Maurya concluded, noting that broad-based moves purely on expectation are unlikely.

Sector-Specific Investment Opportunities

Analysts have identified several sectors positioned to benefit from anticipated government policy focus:

Infrastructure and Defense

Expectations for sustained high allocation to support 'Make in India' initiatives make these sectors attractive:

Renewables and Critical Minerals

The global shift toward green energy and energy security has brought focus to companies like National Aluminium Company, Tata Power, and GMDC.

Rural and Consumption Themes

Anticipated fiscal stimulus to address rural distress creates opportunities across multiple segments:

• Agricultural Inputs: UPL, Dhanuka Agritech, Fertilisers And Chemicals Travancore, Coromandel International
• FMCG Defensive Plays: Hindustan Unilever, ITC
• Auto and Rural Demand: Mahindra & Mahindra
• Financial Services: State Bank of India, HDFC Bank for credit growth exposure

Investment Strategy Recommendations

Experts recommend measured approaches rather than aggressive positioning. Narender Agarwal, Founder & CEO at Wealth1, advised that any Budget rally will likely be measured rather than euphoric, emphasizing the importance of focusing on fundamentally strong businesses rather than pure expectation-based investments.

Tushar Badjate, Director of Badjate Stock & Shares, suggested viewing the Budget as an opportunity to align portfolios with India's long-term growth themes rather than focusing solely on short-term volatility. "A growth-oriented Budget, backed by strong economic momentum, can support broader market participation and set the stage for sustained returns beyond the Budget event," he noted.

Aggarwal concluded that while volatility may persist in the near term, incremental buying could emerge in sectors where policy continuity and earnings visibility are expected, though markets are unlikely to price in aggressive outcomes ahead of actual Budget announcements.

As Budget 2026 approaches, India's real estate sector is advocating for a comprehensive policy framework that addresses rising urban costs, evolving buyer preferences, and the growing influence of institutional capital. Industry leaders view the upcoming budget as pivotal for sustaining housing momentum, improving affordability, and unlocking long-term value across residential, commercial, and mixed-use developments.

Institutional Capital Demonstrates Strong Market Confidence

Recent fundraising activities highlight robust institutional appetite for execution-ready real estate projects, particularly in the National Capital Region (NCR). Bhumika Realty successfully raised ₹170.00 crore from Aditya Birla Sun Life AMC, partnering with global investor BGO, for a newly launched mixed-use project in Faridabad.

Uddhav Poddar, CMD of Bhumika Group, noted that while capital inflows remain healthy, tax frameworks have not kept pace with market realities. He emphasized that home prices across major NCR cities have increased structurally due to higher land, construction, and compliance costs, while tax thresholds and benefits have remained largely unchanged.

Mid-Income Housing Emerges as Growth Driver

Industry executives indicate India's housing market is transitioning from a luxury-led upcycle to a more value-driven phase. Tanuj Shori, Founder and CEO of Square Yards, identified the mid-income segment as the expected growth anchor as premium demand begins to stabilize.

Key reform priorities for mid-income housing include:

• Enhanced tax relief for mid-income homebuyers
• Higher interest deduction limits
• Continued investment in urban infrastructure
• Expanded definition of affordable housing in urban areas
• Interest subsidies for first-time homebuyers

Ramani Sastri, Chairman and MD of Sterling Developers, highlighted affordability as a major challenge for a large section of buyers despite strong home ownership aspirations.

Tier II Cities Drive Market Expansion

A growing consensus among developers positions Tier II cities as increasingly important drivers of residential and mixed-use demand. Rajat Bokolia, CEO of Newstone, highlighted Sonipat's emergence as a key investment destination within the NCR, supported by infrastructure developments.

Yashank Wason, Managing Director of Royal Green Realty, noted that Tier II and III cities now offer infrastructure-led projects, superior amenities, and larger homes at more reasonable prices, reducing migration pressures on metros while delivering long-term investment stability.

Industry Status and Regulatory Reforms

Developers continue to identify approval delays and land-related complexities as major operational bottlenecks. Harsh Jagwani, Managing Director of Notandas Realty, advocated for comprehensive regulatory improvements including single-window clearance systems, cleaner land-title mechanisms, and stricter escrow enforcement under RERA.

Gautam Kanodia, Founder of KREEVA and Kanodia Group, reiterated the sector's demand for industry status recognition, which would improve access to organized capital and financing efficiency for long-gestation projects.

Sustainability and Infrastructure Focus

Badal Yagnik, CEO and Managing Director at Colliers India, emphasized the need to balance fiscal discipline with growth-oriented reforms. Key recommendations include revising affordable housing criteria to reflect price realities in Tier I cities and encouraging retail investor participation through more attractive REITs and SM-REITs structures.

The sector's leadership believes Budget 2026 must establish foundations for sustained long-term growth through policy clarity and execution efficiency, positioning real estate as a cornerstone of India's economic growth strategy amid global volatility and evolving domestic demand patterns.