Budget 2026 Predictions: Top 6 Sectors & Stocks to Watch Before Feb 1
As the countdown to February 1 begins, the Indian market is buzzing with anticipation for Budget 2026-27. From a potential ₹15 trillion infra push to middle-class tax relief, we analyse the structural shifts and key stocks—including L&T, HAL and Reliance—poised to lead India’s next growth phase.
As the countdown to the Union Budget 2026-27 begins, the Indian stock market is entering a high-anticipation phase. With the budget scheduled for February 1, 2026, market participants are looking for cues on how the government will balance fiscal discipline with the vision of "Viksit Bharat 2047."
While general market sentiment remains "growth with prudence," the real opportunities lie in the fine print. Historically, the budget acts as a catalyst for massive sector-specific rallies.
To help you navigate the noise, we’ve analysed the primary sectors and key stocks poised for a breakout.
Infrastructure & Capital Goods: The Multiplier Effect
Infrastructure remains the bedrock of the government’s economic strategy. Industry insiders project a 10–14% hike in capex, potentially pushing the total outlay to an unprecedented ₹13–15 trillion.
The Narrative: Expect a heavy tilt toward "Gati Shakti" and the National Infrastructure Pipeline (NIP 2.0).
Key Stocks to Watch:
- L&T: The primary proxy for India’s engineering and construction cycle.
- IRB Infra: Expected to benefit from the expansion of national highway networks.
- ACE: A key player for MSME-led construction growth.
Defence: Strengthening 'Atmanirbhar Bharat'
The budget is expected to maintain a high capital outlay for domestic defence production, likely pushing for a 10-15% increase in allocations. The goal remains reducing import dependence while boosting exports.
The Narrative: A strategic focus on "Drone Shakti," indigenous radar systems and advanced aerospace.
Key Stocks to Watch:
- HAL, BEL: Dominant state-owned entities in aerospace and electronics.
- Bharat Forge: Poised to gain from increased defence component exports.
- Mazagon Dock: Likely beneficiary of naval modernization and submarine projects.
AI & Digital Utility: The Invisible Backbone
In 2026, data is as critical as diesel. The market expects the government to grant "Infrastructure Status" to Data Centres, which would unlock low-cost credit for the IndiaAI Mission.
The Narrative: High expectations for a sovereign AI compute push and a nationwide data center rollout.
Key Stocks to Watch:
- Netweb Technologies: A direct play on AI supercomputing and server manufacturing.
- Persistent, LTIMindtree: Leading IT firms pivoting heavily toward AI-first services.
- Reliance Industries (Jio): The anchor of India’s Digital Public Infrastructure (DPI) and data center rollout.
Banking & Financials (BFSI): Dividend & Reform Hopes
The financial sector is looking at a "sweet spot." With new draft rules potentially allowing banks to pay out up to 75% of their profits as dividends, PSU banks are suddenly very attractive.
The Narrative: A combination of credit growth revival and higher dividend yields.
Key Stocks to Watch:
- SBI: The frontrunner for dividend hikes and credit expansion.
- IREDA: A niche beneficiary of the government’s focus on renewable energy financing.
- HDFC Bank: Expected to benefit from a recovery in private sector credit demand.
Renewable Energy & EVs: The Green Transition
The transition to a low-carbon economy remains a non-negotiable priority. Investors are bracing for FAME-III and further incentives for green hydrogen.
The Narrative: Focus on GST rationalization for EV components and battery storage subsidies.
Key Stocks to Watch:
- Tata Power: Transitioning into a major player in EV charging and solar manufacturing.
- Suzlon: A key beneficiary of the renewed push for wind energy capacity.
- Adani Green: Closely linked to the 500 GW renewable energy target.
- Exide Industries: Poised to gain from the domestic battery ecosystem expansion.
Consumption & FMCG: Middle-Class Relief
To address uneven rural demand, the government is expected to put more money back into the pockets of the middle class. A hike in the standard deduction to ₹1 lakh is the most anticipated relief measure.
The Narrative: Tax relief could trigger a much-needed rebound in discretionary spending.
Key Stocks to Watch:
- HUL: The barometer for rural and urban consumption.
- Dabur: Leading health and wellness brand
- Tata Motors: Likely to benefit from any tax-led boost in consumer sentiment for PVs.
Conclusion: Strategy Over Speculation
While the days leading up to February 1 will undoubtedly bring volatility, it is essential to look past the "noise." Budget 2026 is less about one-day spikes and more about reinforcing India’s structural growth.
Ignore the 11:00 AM noise. We often see knee-jerk reactions that settle within 48 hours. Use any sharp dips to accumulate large-cap leaders. Buy "Distressed Stocks," not "Distressed Companies." Look for quality leaders that have underperformed the index due to temporary global headwinds but maintain solid cash flows. If you are holding "hope stocks" without earnings, 2026 will be difficult.
For the prudent investor, the strategy is clear: Align your portfolio with "Make in India" and "Digital India 2.0." Focus on companies with deep order books and clear visibility, as they are the ones that will thrive long after the Finance Minister leaves the podium.
Stay tuned as we continue to analyse and track every development in the lead-up to the Union Budget 2026!
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