Budget 2026: What can cheer the Indian stock market?

Union Budget 2026: The Indian government's mega policy event is just about two weeks away. Finance Minister Nirmala Sitharaman will present the Union Budget for the financial year 2026-2027 on February 1. It will be her ninth consecutive Budget.

Last year's budget gave a big boost to consumption through income tax cuts. This year, major personal tax-related announcements are unlikely. Nevertheless, the Budget is expected to show the government's focus on growth, while maintaining fiscal prudence.

According to Joseph Thomas, the head of research at Emkay Wealth Management, the upcoming budget may offer significant continuity and reform orientation with its emphasis on infrastructure development, export promotion, provision of affordable dwellings, and defence production.

"Despite constraints that may arise from projected lower nominal GDP growth, the budget is likely to retain its allocation to public capex more or less intact. For the same reasons, there may not be any major tax overhauls likely in the budget," said Thomas.

Budget 2026: What can cheer the market

A heightened focus on infrastructure, manufacturing, and job creation will be a significant boost to the Indian economy. Announcements on these fronts may revive market sentiment.

On the consumption side, the government has already taken several measures, both fiscally and monetarily. However, private sector capital expenditure remains subdued due to cautious sentiment.

The government's increased allocation to capital expenditure may boost market sentiment amid the gloomy global environment.

"A higher-than-expected allocation for capital expenditure, either by the Centre or through the states, could come as a positive surprise for the markets. Some incentives aimed at the capital markets could also help improve sentiment and provide relief. Changes to personal income tax appear unlikely. GST-related matters are already addressed through a separate mechanism," said Pankaj Pandey, the head of research at ICICI Securities.

Ajit Mishra, SVP of Research at Religare Broking, believes the room for a meaningful fiscal push appears limited, especially on infrastructure spending, given the measures already taken over the past one-and-a-half years.

Additionally, upcoming obligations such as the 8th Pay Commission will remain on the government’s radar, further constraining fiscal flexibility.

"There could be selective measures for export-oriented sectors that are under pressure due to tariff-related issues. Some tinkering with taxes—such as changes related to securities transaction tax or aspects of double taxation—could provide marginal cheer, but overall, the Budget is unlikely to be a major driver for markets," said Mishra.

Investors also hope for a reduction in the Securities Transaction Tax (STT) and the long-term capital gains (LTCG) tax, which can boost market sentiment.

"There are expectations of a reduction in Securities Transaction Tax (STT) and long-term capital gains (LTCG) tax to help boost investor confidence, attract higher FII inflows, and improve overall market participation," said Naveen Vyas, Senior Vice President for Anand Rathi Global Finance.

Vyas believes that to revive and sustain the capex cycle in India, Budget 2026 may announce a meaningful increase in capital expenditure for the railways, with allocations likely to rise to around ₹12.5–13 lakh crore, compared to a steady capex of approximately ₹11.2 lakh crore maintained over the past two years.

"Railways and defence are expected to remain key focus areas in Budget 2026, with capex allocations in these segments potentially witnessing at least a 15% year-on-year increase, reinforcing the government’s emphasis on infrastructure development, indigenisation, and long-term economic growth," said Vyas.

Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, stated that the Union Budget 2026 is unlikely to be dramatically market-moving in the short term.

However, Srivastava emphasised that a disciplined, growth-oriented budget focused on productivity, capital expenditure quality, and policy stability would reinforce India’s long-term investment narrative.

"The signal matters more than the size," said Srivastava.

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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, as market conditions can change rapidly and circumstances may vary.