Equity Echoes

As Budget 2026 approaches on 1st February, market conversations are getting louder.
But before chasing fresh announcements, there’s a more important question investors should ask:

How much of Budget 2025 has actually translated into action?

Because in markets, execution creates trends — not speeches.

Looking Back: What Budget 2025 Set in Motion

Budget 2025 laid the foundation for a growth-with-discipline approach. Instead of headline-grabbing populism, the focus stayed on continuity and long-term direction.

Macro & Fiscal Direction

• Government continued its capex-led growth strategy, supporting infrastructure and manufacturing.
• Fiscal consolidation remained on track, reassuring bond and equity markets.
• Growth-oriented spending was prioritised without destabilising finances.
• Overall tone: policy stability over surprises.

This consistency helped markets stay resilient even amid global uncertainty.

Policy & Tax Landscape: Stability Over Shock

One of the biggest takeaways so far has been what didn’t happen.

• No major rollback in personal tax structures.
• Corporate tax regime remained stable.
• Greater emphasis on simplification and compliance, not frequent tinkering.

For investors, this predictability matters — it allows businesses to plan and markets to price risk more confidently.

5 Sectors to Watch on Budget Day 2026

As Budget 2026 approaches, the spotlight should be on sectors where policy intent is already translating into execution. These are not just announcement-driven themes — they reflect on-ground progress, making them important areas to track on Budget day.

1. Defence

Defence remains one of the most closely watched sectors going into Budget 2026.

• Strong order inflows and improving execution visibility
• Continued push towards indigenisation and defence exports
• Momentum building well ahead of the Budget announcement

With the market already factoring in a ~20% increase in defence allocation, Budget 2026 is likely to reinforce an existing trend rather than create a new one.

The momentum score matrix shows a clear divergence within the defence space.
Select names like Bharat Electronics continue to display strong and consistent momentum across 1-, 3- and 6-month timeframes, indicating sustained institutional interest.

On the other hand, stocks such as HAL and Solar Industries show near-term strength but relatively weaker longer-term momentum, suggesting selective participation rather than broad-based leadership.

Several PSU shipbuilding names and capital-heavy players remain in neutral to bearish momentum zones, highlighting that not all defence stocks are benefiting equally from Budget expectations.

2. Infrastructure

Infrastructure continues to be a steady beneficiary of government spending.

• Road, railway, and PSU-led capex remains consistent
• Focus has shifted from announcements to execution
• Earnings visibility supported by ongoing project flow

On Budget day, investors will look for continuity and execution support, not headline surprises.

The momentum score table highlights a mixed but improving trend within the infrastructure space. Select heavyweights such as UltraTech Cement, ONGC, NTPC, and BPCL show strong momentum across medium to longer timeframes, indicating sustained institutional participation rather than short-term trades.

At the same time, names like Reliance Industries, L&T, and InterGlobe Aviation remain in weak to neutral momentum zones in the short term, suggesting that leadership within infrastructure is selective rather than broad-based.

The data reinforces that infrastructure strength is driven by execution-led pockets—particularly in cement, energy, and PSU utilities—while capital-heavy and diversified players may require clearer triggers from Budget 2026.

3. Manufacturing

Manufacturing is emerging as a structural theme supported by policy stability.

• PLI schemes showing traction across select industries
• India’s growing role in global supply chains
• Gradual improvement in scale and competitiveness

The momentum scores indicate broad-based strength within the manufacturing space, with several large-cap names showing strong and consistent momentum across short, medium, and long-term timeframes. Stocks such as JSW Steel, Tata Steel, Hindalco, and Vedanta reflect sustained participation, supported by improving demand and policy-led manufacturing push.

Budget 2026 may strengthen this trend through refinement rather than expansion of incentives.

4. Energy & Renewables

Energy transition remains a long-term policy focus.

• Capacity expansion underway across power and renewable segments
• Policy continuity supporting long-term investments
• Short-term volatility persists, but structural direction remains intact

Budget clarity will matter more than aggressive new announcements.

The momentum scores highlight a clear split within the energy space. PSU energy majors such as ONGC, NTPC, Coal India, IOC and BPCL are showing strong and consistent momentum across medium to long-term timeframes, reflecting steady institutional interest backed by cash flows and policy support.

5. PSU Banks

PSU banks have moved from balance-sheet repair to growth visibility.

• Asset quality has improved significantly
• Capital adequacy is healthier compared to past cycles
• Credit growth linked to capex and infrastructure remains supportive

The momentum scores reflect broad-based strength across PSU banks, with large names such as State Bank of India, Bank of Baroda, Canara Bank, Union Bank, and Bank of India showing strong momentum across 1-, 3-, and 6-month timeframes. This suggests sustained participation rather than short-term trades.

On Budget day, investors will watch for fiscal discipline, capex continuity, and any policy measures impacting credit growth, which can further strengthen PSU bank momentum.

Budget 2026: What Markets & Economists Are Expecting

As Finance Minister Nirmala Sitharaman prepares to present Budget 2026 on 1 February 2026, analysts, economists and industries have outlined several key expectations that could shape the economy and markets — especially if they are backed by execution and clarity rather than just announcements.

1. Continued Fiscal Discipline & Growth Support

Analysts expect the government to maintain fiscal discipline despite global uncertainties, balancing growth needs with prudent finances. Strong public capital expenditure (capex) is anticipated to remain the growth anchor, supporting GDP expansion even amid external pressures.

2. Capex to Stay Elevated

Market participants foresee high capital expenditure levels again, reinforcing India’s infra-led growth model. Capex continues to underwrite infrastructure, manufacturing and related industries as core drivers for long-term growth and jobs.

3. Defence Allocation Expected to Rise

Analysts expect a 20%–25% rise in defence capital outlay, which would build on recent trends toward indigenisation and technology upgrades in the sector. If confirmed, this could further validate the defence theme that markets have priced in.

4. Tax Predictability & Fairness

There are calls for tax relief and simplification, especially for middle-class households and fixed-income investors. Suggestions include aligning tax treatment of FD interest with capital gains and reducing lock-in periods for tax-saving instruments — measures that could boost investor sentiment.

5. Support for Export-Oriented Sectors

With global headwinds, including tariff pressures and currency volatility, industries like exports, engineering, and manufacturing are expected to seek budget support — such as GST rationalisation, export incentives and MSME support — to enhance competitiveness.

6. Infrastructure & Technology Prioritisation

Beyond physical infrastructure, experts anticipate heightened focus on digital and critical infrastructure, including cyber-physical security, data-center rollout and deep-tech capabilities. Such policies could boost segments like telecom, digital services, and IT infrastructure.

7. Broader Policy Reforms

Reforms to liberalise investment, improve ease of doing business, and deepen structural reforms in financial sectors — such as insurance and pensions — could be part of the Budget narrative to attract domestic and foreign capital.

8. Consumer & Taxpayer Relief Measures

Middle-class taxpayers often look for relief in slabs, deductions or compliance simplification. While outright tax cuts are less certain given fiscal constraints, adjustments in deduction limits and simplification of compliance rules could be on the table.

What This Means for Investors

Taken together, these expectations underline a clear theme:

🎯 Budget 2026 is likely to emphasise continuity over disruption — supporting growth while maintaining fiscal balance.

For investors, the crucial takeaway is that policy direction and clarity matter more than momentary headline gains. Markets tend to reward sectors with visible execution, predictable policies, and structural incentives — not just budget day promises.

Disclaimer: The information shared is based on publicly available data and market observations. Past performance and momentum scores do not guarantee future results. Investors should exercise due diligence and consult their financial advisor before acting on this information.