As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026 on Sunday, February 1, the Indian stock market is bracing for a high-stakes session. This marks only the second time in history that the markets will remain open on a Sunday to process the fiscal roadmap, according to market experts.
Navigating Selective Optimism in Domestic Markets
The 2026 Union Budget arrives at a critical juncture. While India remains a global growth outlier, the domestic market is currently navigating a period of selective optimism. Analysts suggest that this budget will mark a structural shift, moving away from broad-based consumption triggers toward a production-led Build India agenda.
Key Demands from Foreign Institutional Investors
Gaurav Bora, a stock market expert from Pimpri-Chinchwad, emphasized the importance of attracting Foreign Institutional Investors (FIIs). He stated that the Budget must ensure fiscal discipline, tax stability, and policy continuity to draw global funds. Currency stability and strong corporate earnings growth will be key drivers in this effort.
Global investors seek predictability, and India has the opportunity to position itself as the most stable emerging market destination. Bora highlighted that FIIs prefer clarity in taxation policies, as sudden changes in capital gains tax, dividend taxation, or surcharge structures create uncertainty.
Recommendations for Tax Framework Stability
To foster a conducive environment for investment, Bora proposed several measures:
- Ensure stability in the capital gains tax framework
- Avoid retrospective taxation
- Simplify compliance for foreign portfolio investors
Policy continuity encourages long-term capital rather than short-term speculative flows. Further reforms to strengthen market depth and transparency can attract global funds, he added.
The Role of Currency Stability
Bora also pointed out that currency stability is a major factor for FIIs. Even if equity returns are attractive, sharp rupee depreciation can erode gains. Policies that improve the current account balance, boost exports, and manage inflation help stabilize the rupee, making India more attractive to international investors.
In summary, as the budget presentation nears, experts stress that maintaining tax stability, particularly in capital gains, is crucial for sustaining market confidence and driving economic growth through foreign investments.
