Budget 2026: Atul Parakh, CEO of Bigul, believes that the upcoming Union Budget is a high-risk event. In the run-up to the mega event, Parakh doesn't anticipate any rallies. He rather advises investors to stay on the sidelines and sit on cash on Budget day and deploy money once clarity on the policy changes emerges. Defence, infrastructure, and textiles are key sectors to keep on the radar, he opined. Edited excerpts:
Budget 2026: Atul Parakh, CEO of Bigul, believes that the upcoming Union Budget is a high-risk event. In the run-up to the mega event, Parakh doesn't anticipate any rallies. He rather advises investors to stay on the sidelines and sit on cash on Budget day and deploy money once clarity on the policy changes emerges. Defence, infrastructure, and textiles are key sectors to keep on the radar, he opined. Edited excerpts:
The market has remained cautious ahead of the Union Budget for years. Do you expect this trend to continue?
Indian stock markets have shown weakness in January, with Nifty 50 delivering negative returns multiple times ahead of the Union Budget. Current market sentiment remains cautious due to FPI outflows, global uncertainties, and Budget anticipation. The trend appears likely to continue in January 2026, though selective opportunities may emerge post-Budget.
Typically exhibits caution one month before the Budget, declining in four of the last five years, except in 2024. This pattern aligns with profit-booking and policy uncertainty. Pre-Budget rallies are unlikely; instead, volatility and selective buying in growth themes like infrastructure are anticipated. Markets may stabilise post-Budget if growth measures materialise, but near-term weakness persists.
What are your overall expectations from the Budget 2026? And what kind of an impact do you envision for the market?
We do not expect major income tax cuts or big changes in GST in this budget, as the government remains focused on controlling the fiscal deficit. Tax collections are likely to grow in line with the economy, but large tax relief measures are unlikely. The main priority of the FY27 Budget is expected to be capital spending, with government capex projected to rise by around 10% YoY and remain close to 3.1% of GDP. The focus is on investment-led growth, especially in areas important for India's long-term strength, such as defence, infrastructure-related manufacturing, power, nuclear energy, electronics, pharmaceuticals, and critical minerals. This shows a clear preference for building long-term assets rather than boosting short-term consumption.
Corporations are currently expanding existing capacities and strengthening balance sheets rather than starting large new projects, and the government is likely to continue leading the investment cycle. Given this backdrop, investors should align with capex-driven themes like defence, infrastructure, capital goods, power, and manufacturing-linked PSUs. We are cautious on consumption-led bets. Since this budget is unlikely to offer major tax relief or subsidy expansion, we do not expect an immediate consumption boom driven by policy. Consumption recovery is likely to remain gradual and uneven.
Which sectors do you believe will be the biggest beneficiaries of Budget 2026, and why?
Defence, infrastructure, and textiles are key sectors to keep on the radar. In the aftermath of Operation Sindoor, policy emphasis is likely to shift toward proactive capital expenditure, providing a structural tailwind to the Defence sector. For Infrastructure, expectations will be to step up investments in futuristic areas, including AI, green hydrogen, and advanced semiconductor manufacturing, to compete globally. For textiles, targeted financial support is likely to be extended to offset tariff-related pressures, given that the sector has been significantly impacted by tariffs.
Government borrowing and fiscal deficit remain key concerns—how critical are these for bond yields and equity markets?
Government borrowing and the budget deficit are still key drivers of both bond yields and stock markets. The fiscal target in the Union Budget 2025 of 4.4% for FY26 (below market expectations) proves credible fiscal consolidation that will anchor bond yields and assist INR stability. Although gross borrowings are a tad bit more than expected, net borrowing of ₹11.5 trillion is broadly in line with expectations, so as not to exert upward yield pressure. The lack of short-term borrowings is especially favourable for the short-to-medium part of the yield curve. The government's pledge to cut the debt-to-GDP ratio to 50% by 2031 from 57% now offers medium-term structural solace. Meanwhile, for the equity markets, strong fiscal discipline will lower fears of crowding out, provide room for monetary policy, and keep foreign investors interested. Increased infra funding through NaBFID, along with fiscal prudence, offers a good macro environment for both FI and equity investors. RBI's potential OMO support further mitigates bond yield risks heading into the February MPC meeting.
From a trader's perspective, how should investors position themselves ahead of Budget Day?
The upcoming Union Budget is a high-risk event. Traders must respect the India VIX and avoid buying naked options, as expensive premiums will likely deflate immediately after the speech, causing losses even if the market moves in your favour. Technically, the market is stuck in a consolidation zone between 25,500 and 26,000. My advice is to wait for a decisive breakout rather than guessing the direction. If you must participate, look at defensive sectors like FMCG or policy-driven themes like Defence, Railways, and Rural consumption. The most important rule is to protect your money. Prices will be volatile during the Budget speech, so it is perfectly smart to just sit with cash and do nothing. Wait for the confusion to clear before you make a move.