Budget 2026: Falling in 11 out of the 15 trading sessions in January so far, the Indian stock market's benchmark indices have lost over 3% on a month-to-date (MTD) basis in the run-up to the Union Budget. Apart from Budget-related jitters, the uncertain geopolitical environment and elusive India Inc earnings seem to be weighing on investor sentiment.
BSE Sensex closed Thursday's session at 82,307, down 3.4% against the December close. Its broader NSE counterpart, Nifty 50, has lost 3.28% in the same period as it trades below the 25,300 level.
The pain is deeper as you move down the rung, as Nifty Midcap 100 and Nifty Smallcap 100 indices are down 4.2% and 5.8%, respectively, in January alone.
While the markets are in a perfect storm as headwinds from Trump tariffs to trade war fears and FII selling, the question remains how to position ahead of the mega event and the pockets that offer value following the steep correction.
Sectors to look ahead of Budget 2026
In light of the sharp pre-Budget correction, investors looking for safety and value should consider a defensive rotation mixed with strategic long-term bets, advise analysts.
They are bullish on the banking space, especially large lenders, along with select PSUs and companies from the manufacturing space.
Santosh Meena, Head of Research at Swastika Investmart, said the private lenders like HDFC Bank, Kotak Mahindra Bank, and Federal Bank have seen their valuations moderate significantly, offering a favourable entry point relative to their historical averages.
Simultaneously, despite the recent pullback in broader markets, he believes the structural story for PSUs remains intact. Meena recommended stocks like ONGC, BEL, and Hindustan Copper are compelling due to their alignment with energy security, defence indigenisation, and industrial demand. Additionally, allocating capital to the FMCG sector can provide a necessary defensive hedge, offering earnings visibility and stability to the portfolio during this period of heightened volatility, he added.
Echoing a similar view, Balaji Rao Mudili, Research Analyst at Bonanza, said while defensives, (FMCG, pharma) offer a valuation safety net, the primary engines of India's GDP growth are expected to be banking (BFSI) and manufacturing.
"In manufacturing, the defence sector can be focused due to higher allocation expectations in the budget following the need of increasing security on the borders and a push towards indigenisation efforts, i.e. creating import substitution and promoting Make in India initiatives. Additionally, global headwinds leading to war-like situations can benefit defence stocks," Rao opined.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.
