Budget 2026: Capex revival, policy continuity could lift stock market sentiment, says Green Portfolio PMS co-founder

Budget 2026: Divam Sharma, the co-founder and fund manager at Green Portfolio PMS, believes that a Budget focused on policy continuity and measures to address the visible slowdown in the investment cycle will cheer the Indian stock market. Sharma says markets will also look for fiscal discipline without growth sacrifice. In an interview with Mint, Sharma also shared his views on stock market trends, Q3 earnings, and RBI policy expectations. Edited excerpts:

What budget announcements can cheer the stock market?

The stock market would be cheered by a Budget that signals policy continuity while addressing the visible slowdown in the investment cycle.

A clear push toward reviving government capital expenditure, especially in EPC, infrastructure, and core manufacturing, would be a strong positive, given recent moderation in project awarding and execution.

Targeted support for export-facing sectors under pressure from global trade disruptions, such as fisheries and select agri-exports impacted by US tariffs, would also improve earnings visibility for mid-cap companies operating in these segments.

Markets would further welcome fiscal discipline without growth sacrifice—a credible glide path on deficit reduction combined with sharper allocation efficiency rather than headline-heavy spending.

Any steps to improve liquidity for MSMEs, expedite GST refunds for exporters, and simplify compliance would directly improve cash flows and profitability.

Finally, stability on tax policy and capital gains, along with incentives for domestic manufacturing and energy transition, would reinforce investor confidence. In short, markets are looking less for populism and more for execution clarity, capex revival, and earnings support.

Geopolitical risks have increased significantly. Are we going to see a prolonged phase of market volatility?

It is very likely that the market remains volatile given the enormity of events that are concurrently taking place. While the macros are unpredictable and fragile, we are finally seeing earnings recovery.

IT, for example, have been able to diversify its source of growth from North America to the European region, which is aiding in robust growth guidance.

At the same time, small- and mid-cap stocks have undergone a deep correction.

The median stock price decline among companies with a market capitalisation below ₹3,000 crore has exceeded 50%, significantly resetting valuations and improving risk-reward dynamics in select pockets.

What are your views on Q3 earnings so far?

Q3 earnings so far reflect a mixed but gradually improving picture. While the macro environment remains uncertain and global cues continue to be volatile, earnings recovery is becoming more visible across select sectors rather than being broad-based.

Financials have remained a key stabiliser, supported by steady loan growth and relatively controlled asset quality.

The IT sector is showing early signs of revival, aided by diversification of demand beyond North America and improving deal pipelines, even though margins remain under pressure.

In contrast, steel companies are facing earnings headwinds, with softer realisations and higher input costs compressing margins despite stable volumes.

On the positive side, solar and renewable energy players have delivered strong growth, driven by robust order books, capacity expansion and policy support, making them clear outperformers this quarter.

Meanwhile, small and mid-cap earnings remain uneven, reflecting the sharp correction already seen in stock prices.

Overall, Q3 earnings point to selective strength rather than a broad earnings upcycle, with stock-specific opportunities emerging as valuations reset.

What do you expect from the RBI policy? What do the current macroeconomic indicators suggest?

The RBI appears comfortable with the ongoing disinflation trend, which gives it greater flexibility to stay supportive of growth.

Current macro indicators point to steady domestic momentum, with healthy GST collections, strong e-way bill generation and resilient consumption data indicating that economic activity remains intact.

While global uncertainties persist, India’s internal demand conditions look stable, reducing the urgency for any aggressive policy response. As a result, the RBI is likely to hold firm on the current repo rate of 5.25%.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.