Budget 2026: Seen neutral from market lens; Nuvama prefers telecom, internet, IT

Budget 2026: The Budget for 2026 is set to be unveiled by Finance Minister Nirmala Sitharaman on February 1, 2026. Various industries are buzzing with expectations and recommendations. In the meantime, market experts appear to have a generally neutral outlook.

The brokerage firm Nuvama Institutional Equities suggests that the budget for FY27 will likely maintain a neutral stance from the market's perspective. In their latest report, they noted that the FY27 budget is expected to be somewhat supportive of growth, which is a positive development. However, they believe that the recovery is anticipated to be modest and will not interrupt the cycle of earnings downgrades.

Nuvama emphasizes that for FY27, the key risk to earnings will be margin mean reversion rather than top-line growth. The budget is not expected to significantly favour any specific sector. Therefore, Nuvama continues to adopt a defensive approach. Sectors they favour include telecom, internet, IT, consumer, cement, and chemicals, while they remain cautious on BFSI, industrials, autos, and power.

Sectoral Expectations

Agriculture

The brokerage indicated that the government intends to assign roughly ₹1.5 trillion to the agriculture ministry to sustain PM KISAN and insurance initiatives.

Nuvama anticipates that because of crop damage caused by unpredictable weather last year, there may be an increased allocation for crop insurance. The brokerage thinks this will have a Neutral Impact on the sector.

Defence

The brokerage indicated that the government's capital spending on defence is anticipated to increase significantly due to the modernization efforts (with new reforms expected), and that larger projects are set to come to fruition in FY27, along with iDEX (which targets start-ups in technology), among other initiatives, as the emphasis on indigenization, modernization, and the growth of exports continues.

Nuvama projects that defence capital expenditure is expected to increase by approximately 8% year-over-year, with a greater focus on research and development, unmanned aerial vehicles (UAVs), and anti-drone technologies.

The additional budget will be requested in light of Operation Sindoor and several significant programs in the pipeline, such as QRSAM, P-75I, and Pinaka, which are anticipated to progress, with a tilt towards the Air Force and Navy.

The brokerage states that the anticipated increase in the defense budget for FY27 will have a fundamentally positive effect on the sector, speeding up the transition towards earnings driven by execution.

Choosing the right stocks is essential, with a focus on companies that demonstrate quicker execution, greater localisation, and better cash conversion instead of just relying on growth in the order book.

Railways

The brokerage anticipates that railway capital expenditures will see an increase in budget allocation following three years of relatively subdued growth, with a focus on enhancing capacity, introducing new rolling stock, and undertaking safety projects.

The overarching policy goal continues to be the reduction of logistics expenses and the enhancement of competitiveness; although logistics costs in India have seen some improvement, they still exceed the approximately 6–7% level typical of developed nations.

Others

The brokerage anticipates robust qualitative and quantitative insights from the Government of India to promote base load servicing for power demand and to encourage broader private sector involvement through incentives.

The brokerage believes that Power T&D stocks will attract attention, along with stocks driven by private capital expenditure, following favourable comments on the introduction of PLI and widespread incentives.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.