You’re about to miss the biggest market catalyst of 2026 if you ignore this budget.
- Axis Securities projects 7.4% real GDP growth for FY26, driven by capex.
- Capital expenditure is expected to rise 10‑15% YoY, unlocking multi‑billion‑dollar opportunities.
- Fiscal deficit target of 4.2‑4.4% of GDP aims to keep bond yields tame.
- Top picks span cement, autos, telecom, healthcare and niche themes like rare‑earths.
- Both bull and bear cases hinge on execution of capex and disinvestment plans.
Why the Union Budget 2026 Matters for Your Portfolio
The upcoming FY26‑27 budget arrives at a rare sweet spot: domestic fundamentals remain robust while global headwinds—geopolitical tension, tighter financing, slowing demand—create a risk‑reward imbalance that favours a policy‑driven rally. Axis Securities argues that a budget that sustains growth without derailing fiscal consolidation will reinforce India’s appeal to foreign investors, especially as global equity allocations tilt toward emerging markets with strong macro discipline.
How Axis Securities’ Stock Picks Align With Fiscal Priorities
Axis’s shortlist reads like a blueprint for the government’s capex agenda. UltraTech Cement and NALCO sit at the heart of infrastructure upgrades—roads, railways, power transmission. Maruti Suzuki benefits from higher disposable incomes and stable tax regimes that the budget is expected to preserve. Bharti Airtel and CreditAccess Grameen are positioned to capture the push for digital inclusion and financial deepening. The brokerage also flags thematic bets outside its core coverage: GMDC for rare‑earth minerals, BEL and MTAR for defence indigenisation, Amara Raja Energy for the EV ecosystem, and CESE as a power‑reform play.
Sector‑Level Implications: Infrastructure, Autos, Banking and Beyond
Infrastructure & Materials: With an estimated ₹12‑13 trillion earmarked for capex, sectors that supply the physical backbone—cement, steel, metals, power—are poised for earnings visibility. Historical patterns show that each 1% rise in capex translates to roughly 0.3%‑0.5% uplift in sectoral earnings over the next two years.
Automobiles & Ancillaries: Higher consumer spending and a stable GST regime create a fertile environment for Maruti Suzuki and its suppliers. The sector’s P/E multiples have compressed to 15‑16x, offering upside if sales accelerate by 8% YoY, a level consistent with past post‑budget surges.
Banks & NBFCs: Credit demand from MSMEs and project financing will rise as capex projects seek funding. Axis expects a 4%‑5% increase in loan book growth for major banks, supporting net interest margin expansion.
Healthcare, Hospitality & Telecom: Targeted policy support—tax incentives for hospitals, tourism‑linked hospitality credits, and spectrum allocations for telecom—should improve top‑line growth rates by 6%‑9% in FY27.
Historical Context: What Past Budgets Teach Us
Looking back at the 2017 and 2022 budgets, both featured aggressive capex pushes that delivered 4‑6% equity market outperformance over the subsequent 12‑month horizon. The key differentiator was execution; when disinvestment targets were met, private capital followed, amplifying returns. Conversely, budgets that promised high spend but fell short on asset monetisation saw muted market reactions and higher volatility.
Technical Corner: Fiscal Deficit, Disinvestment, and RBI Dividend
A fiscal deficit of 4.2%‑4.4% of GDP signals disciplined borrowing while leaving room for growth‑oriented outlays. Disinvestment—selling stakes in public enterprises—could generate ₹50‑70 billion in non‑tax revenue, tightening the deficit gap without raising taxes. The RBI’s dividend to the treasury acts as a fiscal backstop; a larger surplus transfer can offset short‑falls, preserving the budget’s growth narrative.
Investor Playbook: Bull and Bear Cases After the Union Budget 2026
Bull Case
- Capex allocation hits the high‑end of the ₹13 trillion range, driving 10%‑12% earnings uplift in infrastructure‑linked stocks.
- Disinvestment targets are met early, improving fiscal optics and lowering sovereign yields.
- RBI dividend exceeds expectations, providing a fiscal cushion that allows the government to keep growth‑spending intact.
- Result: Indian equities rally 8%‑12% over the next 6‑12 months, with sector leaders (UltraTech, Maruti, Bharti) outperforming by 2‑3 percentage points.
Bear Case
- Capex growth stalls at <10% YoY due to delayed project clearances, muting earnings impact.
- Disinvestment proceeds fall short of ₹50 billion, widening the fiscal deficit to >4.6% of GDP.
- RBI dividend is lower than market expectations, tightening fiscal space and prompting a modest cut in growth‑focused spending.
- Result: Market gains limited to 2%‑4%; sectoral laggards underperform, prompting rotation to defensive assets.
For investors, the prudent approach is to build a core position in the high‑conviction picks—UltraTech, Maruti, Bharti—and overlay tactical bets on thematic plays like GMDC and Amara Raja Energy. Keep a watch on the execution metrics (capex release, disinvestment receipts, RBI dividend) to adjust exposure between bull and bear scenarios.