New Delhi, Jan 22 (NationPress) The Union Budget 2026 is set to uphold fiscal responsibility while focusing on strategic, capital expenditure-intensive sectors, making the defence sector the primary recipient of increased funding, as highlighted in a recent report.

The analysis from investment platform smallcase revealed that approximately 40 percent of surveyed participants identified the defence sector as deserving of greater financial allocations, driven by factors such as indigenisation, modernisation, export potential, and ongoing government investment.

A pre-budget survey conducted with over 50 investment managers placed infrastructure in second place, with about 29 percent expressing confidence in public capital expenditure and long-term economic growth multipliers.

Equity managers displayed optimism regarding India’s medium-term equity outlook, showing a strong inclination towards capital expenditure-driven sectors despite expectations of short-term market fluctuations.

The majority of managers maintained a positive stance on Indian equities for the medium term, with over 82 percent anticipating that the Nifty 50 will finish FY27 above 25,000, and 43 percent predicting it will fall within the 25,000–27,500 range, according to the report.

Inflation forecasts appear stable, as more than 85 percent of respondents expect FY27 inflation to remain in the 4–5 percent range or below 4 percent, the report noted.

Manufacturing represented around 18 percent of sectoral responses, buoyed by ongoing PLI-led policy support. Consumption and agriculture garnered approximately 7 percent each, suggesting expectations for focused rather than broad-based support, the report highlighted.

Nearly 80 percent of managers predicted short-term market fluctuations around the Budget, primarily due to event-driven positioning, unexpected policy changes, and global influences. However, most believe that volatility will be temporary as markets revert to fundamental values, the report stated.

When it comes to taxation, the survey indicated expectations for incremental adjustments rather than sweeping changes. Most respondents noted limited potential for substantial corporate tax reductions, while more targeted relief or simplification for salaried individuals is deemed more likely.

Stability in corporate taxes is expected, with a continued emphasis on capex-linked incentives and compliance, according to the report.

Many respondents highlighted selective measures aimed at bolstering urban and rural demand instead of broad fiscal stimulus, aligning with the government’s commitment to fiscal discipline, the report concluded.

aar/na