Budget 2026 Outlook: Expert Foresees Fiscal Pause to Fuel Growth and Markets
Sandeep Raina, Senior Vice President of Research at Nuvama Group, has shared his expectations for the upcoming Budget 2026, highlighting a potential pause in fiscal consolidation as a key pro-growth measure. In an exclusive interview, Raina emphasized that this strategic move could positively impact the stock market and support economic expansion amidst global challenges.
Key Expectations from Budget 2026
Raina anticipates that the Government of India may introduce targeted incentives for the rural economy, driven by factors such as low food inflation and rising prices of gold and land. Additionally, he expects specific incentive schemes for the export sector, which has faced stress following recent US tariffs. These measures aim to bolster sectors crucial for India's economic resilience.
Since the government has already implemented initiatives like GST rationalisation and tax cuts in CY25, further direct incentives might be limited. However, to sustain short-term consumption, fiscal support remains essential. Raina's assumption is that avoiding further fiscal consolidation in FY27 is critical for this budget's success.
Impact on Government Capex and Investor Sentiment
When asked about the focus on fiscal consolidation potentially curtailing government capital expenditure—a key growth driver—Raina reiterated his expectation of a pause in FY27. This approach is seen as pro-growth and favorable for investors, as it allows for continued investment in infrastructure and other developmental projects without tightening fiscal policies prematurely.
Global Factors and Their Influence
Raina addressed the impact of global factors, such as US tariffs, on the Indian economy and markets. He noted that before these tariffs, corporate earnings were already slowing down in CY24/CY25, and the additional stress has exacerbated challenges. While Indian exports to the US are limited in overall terms, they are highly profitable for exporters, making earnings vulnerable to disruptions.
Despite these headwinds, Raina believes that some sectors, including BFSI, auto, and metals, could support earnings growth of 10% to 13% in FY26, building on a low base of +6%. A key risk to this assumption is the absence of major disruptions in the global economy, particularly the heated US economy.
Early Trends in Q3 Earnings
Assessing early trends of Q3 earnings, Raina observed that IT companies have reported decent results due to low bases and expectations. However, banks and other companies, including Reliance Industries, have missed overall marks. These trends suggest estimated numbers that align with cautious optimism but highlight areas of concern.
Navigating Market Uncertainties
Given the unpredictability associated with factors like US tariffs under the Trump administration, Raina advised investors to focus on asset allocation strategies. He emphasized that headwinds such as tariffs, wars, and pandemics are inherent in investing, making a multi-asset approach prudent. The experiences of CY25 have reinforced the value of this strategy in managing risks and capitalizing on opportunities.
Disclaimer: This analysis is for educational purposes only. The views expressed are those of the expert and not necessarily reflective of broader market opinions. Investors are advised to consult certified experts before making any investment decisions, as market conditions can change rapidly.
