Indian equities are heading into the Union Budget with expectations of a steady fiscal stance and a renewed push on capital expenditure, as investors position for infra-linked earnings growth amid limited room for fresh stimulus.
Market participants broadly expect the government to stick to its fiscal consolidation path, with the FY27 deficit likely to be set in the low 4 per cent range of the GDP, even as gross market borrowing remains elevated to meet heavy bond redemptions and sustain infrastructure outlays.
“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.”
For equity investors, the policy message is likely to reinforce preference for capital goods, construction, metals and infrastructure-linked stocks
“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.
For equity investors, the policy message is likely to reinforce preference for capital-goods, construction, metals and infrastructure-linked stocks, which stand to benefit directly from continued public spending on roads, railways and manufacturing capacity. With committed revenue expenditure already absorbing a large share of government receipts, economists see little headroom for broad consumption-boosting measures this year.