The Union Budget 2026-27, to be presented by Finance Minister Nirmala Sitharaman on February 1, 2026 (a Sunday, marking her ninth consecutive presentation), is set to emphasize fiscal prudence, sustained capital expenditure (capex), and targeted sectoral support amid global uncertainties.
The Economic Survey 2025-26 projects real GDP growth of 6.8–7.2% for FY27, with a fiscal deficit target around 4.2–4.4% of GDP, continuing the capex-led growth model.Markets anticipate continuity in infrastructure push, defence indigenisation, manufacturing incentives, and incremental reforms rather than major stimulus or tax overhauls.
Capex is expected to rise 10–15% to Rs 12–12.5 lakh crore, focusing on roads, railways, urban development, defence, and emerging areas like AI, renewables, and defence. Key themes include balancing growth with fiscal discipline, supporting employment, and countering external risks like potential US tariffs.
Key Sectors to Watch and Why
Infrastructure and Capital Goods
Sustained high capex remains the core driver, with expectations of allocations for highways, railways, urban projects, and a refreshed National Infrastructure Pipeline. This could crowd in private investment and boost execution in engineering and construction.
Stocks to watch: Larsen & Toubro (L&T), ABB India, Siemens, Hitachi Energy, KEC International, UltraTech Cement, Ambuja Cements, Shree Cement.
Defence and Aerospace
A sharp 10–15% hike in defence capex is anticipated, focusing on indigenisation, procurement, R&D (e.g., drones, missiles, AI), and “Make in India” initiatives. Recent DAC approvals signal robust order pipelines.
Stocks to watch: Hindustan Aeronautics (HAL), Bharat Electronics (BEL), Bharat Dynamics, Garden Reach Shipbuilders, Mazagon Dock Shipbuilders, Solar Industries.
Railways and PSU Banks/Financials
Railways may see range-bound increases with focus on modernisation and efficiency. PSU banks could benefit from credit growth pickup, potential mergers, and stable asset quality amid infrastructure financing.
Stocks to watch: State Bank of India (SBI), Bank of Baroda (BoB), Punjab National Bank (PNB), Power Finance Corporation (PFC), IRDEA (for RE financing).
Renewables, EVs, and Green Energy
Policy continuity in clean energy, EVs, solar, and energy transition is expected, with incentives for manufacturing and infrastructure.
Stocks to watch: Adani Green, Tata Power, NTPC, Power Grid, NHPC, Suzlon.
Consumption, Housing, and Related
Potential tax relief or incentives for affordable housing (e.g., PMAY extensions) and consumption boost via prior GST/income tax measures could support discretionary spending.
Stocks to watch: Titan, Grasim, Aadhar Housing Finance, Home First Finance, Hindware Home Innovation.
Other Notable Areas
Manufacturing/MSMEs: PLI 2.0 extensions, export support for textiles/garments amid global tariffs.
Agriculture: Higher allocations for livelihoods, farm income support, and tech integration (e.g., AGRISTACK).
Power and Capital Goods: Siemens Energy, CG Power for execution continuity.
Market Outlook and Strategy
Analysts expect a balanced Budget without major surprises, focusing on execution over announcements. Defence, infrastructure, and capex-linked plays offer strong visibility, while consumption and financials could gain from stability. Markets may see volatility on February 1, with Nifty in a 24,000–28,000 range amid global headwinds. Investors should prioritize stocks with solid fundamentals, order books, and earnings momentum rather than speculative bets.
This is based on pre-Budget consensus from analysts, brokerages, and reports as of late January 2026. Actual announcements could differ, so monitor live updates during the presentation at 11 AM IST.
