Jefferies
FY27 Budget moderates fiscal deficit reduction, implying higher govt spending.
Govt. focus on ease of doing business visible for GCCs & other corporate and individual taxpayers.
Robust capex growth (especially in Defence) is a positive.
Slightly higher deficit (10–15 bps above expectations) may pressure yields, a negative for NBFCs/PSU banks.
Data centres & Electronics manufactring gets a tax & Govt budget boost; higher STT -a negative for capital market plays.
GS
FY27 fiscal deficit pegged at 4.1–4.3% of GDP vs 4.4% in FY26, signalling softer fiscal drag on growth
Debt anchor reiterated; central government debt targeted at ~50% of GDP by FY31
Public capex steady at 3.1% of GDP; state capex up 33% YoY, defence capex up 17% YoY
Tax assumptions seen achievable; lower GST share offset by higher excise, divestment targets optimistic
Net market borrowing remains elevated; RBI likely to stay a net bond buyer in FY27
Policy focus on macro stability and balance sheet strength over near-term growth push
Bernstein
Budget delivered what was feasible given limited policy flexibility.
It provided some growth in spending and prioritized long-term strategic areas for India, such as rare earths, biopharma, chemical parks, phase 2 semiconductor incentives, and enhanced component schemes.
Overall, view this budget as neutral for India and see no reason to alter our 12M outlook despite the recent market decline
We do anticipate some rebound though post the steep fall.
Sectors such as Defence, EMS (semis) are bright spots
Remain overweight on financials, telecom and IT and do not see any major negatives to change our views on these overweight sectors.
CLSA
(GoI) retained its FY26 fiscal deficit at 4.4% and announced a cut to 4.3% in FY27
While revenue budgeting appears conservative, higher-than-expected gross borrowing may pressure bond yields.
Good growth in defence and railway capex along with a jump in rural employment guarantee spending were the key positives, but other key sectors did not get any near-term growth push
The hike in STT may hurt equity market liquidity but a lower tax rate for buybacks could be a positive for few stocks
Positive for defence and EMS stocks & negative for PSU banks.
CITI
Economics: Budget announcements focus on strategic manufacturing. In-line fiscal deficit target at 4.4% of GDP in FY26 and 4.3% in FY27. Gross tax revenue assumption looks credible, divestment target has been increased, and dividends assumptions are marginally higher.
Capex growth is budgeted at 11.5%YY with focus on defence (17-18%), power, renewables and state capex loans.
Lower subsidies account for half of total spending compression (0.30% of GDP) in FY27.
GSec issuance at INR 11.7trn (net) and INR 17.2trn (gross) for FY27 suggests continued dependence on OMOs, especially as there are no measures to improve incremental demand
We still expect RBI to preserve rate cut space at the Feb meet and remain proactive on liquidity.
Equity: Overall, negative for brokers, exchanges, PSU banks and positive for select industrials, particularly defence, OMCs, cables & wires, etc
Nomura
India: A budget without “big bang” measures
Focus on capex and manufacturing is a positive, but a slower pace of fiscal consolidation and higher market borrowing are disappointing
See overall budget assumptions as credible, & estimate a fiscal impulse of 0.6pp in FY27, implying a slight positive boost to growth
Expect a cyclical recovery in India, with GDP growth closer to trend at 7.1% in FY27
The budget should be neutral for monetary policy but will likely revive concerns on managing large bond supply (centre and states)
Borrowing numbers are a clear negative for bonds
High supply is coming at a time when the bond market is already suffering from oversupply
Remain cautious on IGBs and see a risk of heading to 7% on the 10y.
Budget Review – Sector View
GS on Defence
FY27 defense budget spend came ahead of estimates.
Key points:
1) Overall defense budget up 7% at INR 7.85tn (US$87.2bn) compared to revised estimates (RE) for FY26 and vs. GSe: INR 7.75tn (US$86.1bn);
2) FY26 defense spend (RE) up 8% compared to Budget Estimates (BE);
3) FY27 Capital procurement spend (BE) up 18% at INR 2.19tn (GSe: INR 1.97tn) compared to FY26 (RE);
4) Within capital procurement, FY27 (BE) for Other Equipment (comprising Missiles, Ammunition, Radar Electronics) is up 62% at INR 822bn.
Believe Solar Industries, Bharat Electronics, and Bharat Dynamics are well placed to be benefit from spending focus on Other Equipment
Also see a potential trickle down benefit for Astra Microwave and Data Patterns
In case of Aerospace, exemption of Basics Customs Duty (BCD) on raw materials for manufacture of parts or components of aircraft including engines is likely to benefit companies such as PTC Industries & Azad Engineering.
Jefferies on Cap Goods
FY26E budget narrative was a visible shift to consumer focus vs 2021-2025
FY27E budget has surprised with Road/Rail rising 8-11% vs 0% in FY26E budget and Defence is up 18%
Ministry of Finance (MOF) new initiatives allocation, which largely remains underutilized, has reduced by 94%.
Overall capex is up 12% and excluding MOF and BSNL infusion is up 13%.
Power and defence standout – top picks Siemens Energy, Hitachi Energy, HAL, BEL, KEI and L&T.
CITI on Cap Goods
Key highlight For India industrials/infra is pickup in capex allocation growth in 3 of the largest capex spenders (Rail, Road, Defence) vs trends seen in FY26E, with defense expectedly seeing the fastest allocation growth.
Overall, FY27E central gov’t capex at Rs12.2trn is pegged to grow at 11.5% vs FY26 RE; growth in PSU capex (at Rs4.8trn) for FY27E is also budgeted at a similar number.
From a medium-term perspective,
a) announcements around new rail infra (high-speed corridors and a dedicated freight corridor),
b) steps to promote the datacenter ecosystem
c) steps to scale up manufacturing in multiple end markets (such as electronics) should also provide order inflow opportunities for various E&C and electrical equipment providers.
CLSA on Cap Goods
Deep dive into Budget FY27 points to a thrust into infrastructure capex, with a 50bp rise in capex to GDP led by a significant focus on defence
Overall FY27BE capex, including capex grants, was Rs13.9tn, up 16% YoY on FY26RE, but ‘real’ capex analysis point to 16% YoY growth, indicating a capex pick-up ahead
Important was kick-start of US$200bn in projects for 7 new bullet trains and a new dedicated freight corridor.
Defence capex growth of 17% YoY should reassure the market, but think there is no constraint for this and it depends on project delivery
Government’s off-budget funding could help beat targets
Reiterate Outperform on builders L&T, HNAL, BHE and NCC as orders/execution recover in 2026, which could surprise the markets.
Nomura on Cap Goods
Defence stands out with robust capex growth At INR1.8tn
FY27BE core defence capex is 25%/17% higher than FY26BE/FY26RE allocation
road/railway/defence ministries remained the primary drivers of FY27BE capex.
Capex for roads/railways/defence ministries stood at INR2.9tn/INR2.8tn/INR2.2tn, & thus, these three ministries accounted for 65% of total FY27BE capex.
This steady growth in capex is likely to augur well for the ordering and revenue potential for the players in capex-linked sectors
Major boost for data center capacity addition in India; we expect INR2.2tn of investment over FY26-30F
This is likely to act as a significant positive for CG Power & Cummins given their sizeable presence in data centers segment.
HAL is top pick in defence while CG Power & GE Vernova T&D India top picks in capital goods space
Kotak Inst Eqt on Capital Markets
Sharp STT hike (third in four years) on futures and options came as a surprise.
the STT hike in options may not be impactful, as volumes are influenced much more by accessibility considerations (size of the contract, weekly expiries)
hiking STT in futures appears a bit unreasonable, given the greater institutional participation and could potentially make options more attractive due to lower taxes
lower STT on cash equities would have been more helpful to address the issue of disproportionate share of F&O volumes in relation to cash.
For retail brokers, while January has been a strong month, await clearer trends to emerge from recent commodity price correction and overall trends in volumes & MTF book.
CITI on Capital Markets
GOI has proposed to increase STT on futures to 0.05% from 0.02%, effective Apr‘01, 2026, and increase STT, on options premium and exercise of options, to 0.15%, each, from prevailing rate of 0.1% and 0.125%, respectively
Rise in STT can lead to marginal reduction in F&O volumes, in near term & dampen customer sentiment even as rule out long-term change in customer trading behaviour
Despite rise in STT during FY2024/25, pre-SEBI led regulatory changes, average premium turnover in options were >30% YoY in FY2024/1HFY25.
Post absorbing regulatory changes, starting Nov’24, and STT hike, Dec’25 average premium turnover was 10% YoY.
Angel One/Groww: high F&O revenue mix & marginal top-line pressure, consequently
Minimal impact for other capital market players, including Nuvama.
Jefferies on Capital Markets
Government has hiked STT on options and futures in the budget.
In our view, this as a sentimental negative, however, impact on option turnover is likely to be limited noting a similar increase in overall expenses in Jul’24 budget had limited impact on orders or participation.
Discussions with industry experts indicate up to 5% volume impact
Est. a 5% decline in ADTO/orders for BSE/GROWW could result in 4% earnings impact.
Bernstein on Capital Markets & Insurance
STT hike hurts derivatives trading value chain; Insurance gets a non-event budget
Expect sentiment around derivatives trading value chain to be soft & some volume impact (hard to quantify for now)
For Nuvama, higher STT should hurt profitability of market-makers/high-frequency trading outfits (HFTs)
If higher STT meaningfully eats into the profit spread for HFTs, this would reduce Indian markets profit pool, & thus hurt Nuvama
Insurance sector saw limited attention in Budget speech
No big-ticket changes in sector dynamics, or in tax rates for savers
There was no discussion on insurance commissions, something that featured in economic survey, & in regulatory cross-hairs in recent months
For PB Fin, Budget was a non-event.
Focus will now move to the expected consultation paper from insurance regulator in coming months.
CITI On Banks/NBFCs
Key announcements
1] Fiscal deficit budgeted at 4.3% of GDP; Gross mkt borrowings anticipated at Rs17.2tn (net market borrowings of Rs11.7tn) suggesting continued pressure on bond yields
2] Financial sector is well poised for reforms. High-level committee constituted to align banking with next phase of growth for Viksit Bharat. Vision for NBFCs too outlined with target of credit disbursements
3] Capex outlay growth of 11.5% to Rs12.2tn to support corp credit growth
4] Interest subsidy under PMAY-Urban at Rs15bn for EWS/LIG and at Rs6bn for MIG (vs FY26 budgeted allocation of Rs25bn/Rs10bn
5] PMAY-Urban/PMAY-Rural allocation at Rs186.3bn/ Rs549.2bn (vs Rs198bn/Rs548bn FY26 BE; much higher than Rs75bn/Rs3bn FY25 RE)
6] Guarantee Emergency Credit Line (GECL) outlay to MSME loans at Rs90bn (vs Rs90bn FY26 BE, NIL under RE)
7] Restructuring of PFC/REC. Following policies were expected but not announced: i) Urban affordable housing boost; ii) tax benefit to boost deposits.
CLSA on Real Estate
Govt has proposed positive measures such as clarity on taxes & compliance to GCCs & granting a tax holiday until 2047 to foreign companies for setting up data centres, partly offset by a restriction on use of MAT credits
These measures largely impact property developers focused on development of annuity assets & those monetising their land (for data centres).
Believe long-term positive impact for such developers (expansion of GCCs and data centres) outweighs the impact of MAT credit over the mid-term.
Top picks: DLF and Embassy REIT.
CLSA on HealthCare
Govt. plans to boost medical tourism and Biopharma, cut custom duties for many cancer drugs and rare diseases, and increase the talent pool
Govt. has increased allocation towards healthcare by 33% YoY in FY27, led by enhancement of talent pool and improvement in infrastructure.
Customs duty changes are positive for MNCs but do not benefit Indian pharma companies much
Believe initiatives for medical tourism, improvement in talent pool are positives for large hospital chains.
Morgan Stanley on life insurers
No adverse Budget surprise seen; positive for life insurers amid pre-Budget nervousness
Life insurers likely to outperform in the near term on relief around policy continuity
ICICI Prudential Life best positioned for 4QFY26 VNB growth among peers
SBI Life seen as the next best placed on VNB momentum
HDFC Life also well positioned for near-term performance
Short-term preference: ICICI Prudential Life, followed by SBI Life and HDFC Life
CLSA on Buyback
Change in taxation of buyback was brought in the current budget
Finance minister has proposed to tax buyback as capital gains
Change in buyback taxation effectively reduces the effective tax rate for majority of minority shareholders
This could incentivize IT service companies to undertake share buybacks
Wipro’s share buybacks get the highest attention from investor community
During Wipro’s buyback periods, valuation multiples expand quite sharply and doesn’t follow its earnings fundamentals
Believe for majority of Indian IT service companies, buyback (over dividends) could be the primary route of returning excess cash to shareholders given its more tax efficient nature
Also, this could potentially lead to more stock price volatility closer to board meetings
CLSA on Banks
Higher-than-expected estimate of gross market borrowings for FY27 by government of India
This would affect bond yield, which are likely to rise 5-10bps from current levels
This in turn will affect banks’ treasury income, especially PSU banks more than private banks
PSU Bank treasury income comprised 20% of H1FY26 PBT for SBI, BOB and PNB
Bernstein on Paytm
Maintain Outperform with TP of Rs 1600
Union Budget for FY27 marks a U-turn in the government’s subsidy support for India’s digital payments ecosystem
Government reinstating UPI incentives at Rs 2000 cr for FY27E and sharply revising FY26 allocations upward to Rs 2200 cr
This comes against expectations that UPI incentives could be phased out
The announcement provides visibility on continued policy support for payments infrastructure
A clear positive for Paytm, partially offsetting the impact from the discontinuation of PIDF incentives
Citi on Paytm
Recommendation: Buy, Target: ₹1,375
Higher UPI Incentives allocated for FY26 than budgeted last year
For Payments Fintech, key watch is whether MDR on eligible UPI transactions is allowed – no new development thus far
Morgan Stanley on Dixon
Recommendation: Underweight, Target: ₹8,157
FY27 Budget: Mobile PLI possibly phasing out
Lower provision indicates phasing out of the scheme and very low possibility of being extended beyond March 2026
Government’s focus has been on increasing value addition
Believe Dixon’s value proposition will likely change significantly post expiry of PLI benefits
Brands could look to diversify to other EMS competitors
Citi on Jindal Steel
Maintains Sell rating with a lowered target price of ₹785 (from ₹830)
Have a downside Catalyst Watch on JSPL since 7 Jan
3Q consol adj EBITDA fell ~25% yoy on lower realizations
Costs were marginally lower and volumes higher
Mgmt indicated 3Q was impacted by weaker realizations and one-time startup costs
See potential upside to EBITDA/t, we think this may be rebased on lower basis 3Q
At 10x FY27 EV/EBITDA (Citi est), a fair bit of optimism appears priced in
Citi on January auto sales
Volume growth momentum driven by GST cuts continued in the new year with strong growth across OEMs
Particularly impressed by the robust MHCV sales growth
Tractor volumes witnessed strong growth
Maruti Suzuki, the bellwether of PVs in India, and Bajaj Auto have not reported Jan volumes yet
Union Budget does have some positive implications for the CV segment (capex related, esp defence)
Overall impact on consumption of Budget (PV and 2W demand) would likely be limited
Maintain Maruti, M&M and Hyundai as top picks
Bernstein on Bajaj Auto
Maintains Outperform rating with a raised target price of ₹11,500 (from ₹11,000)
Strong EBITDA growth supported by premiumisation and favourable currency
EBITDA estimates raised by 9.5 to 11% for FY26 to FY27
Domestic motorcycle business stable with recovery in premium segment
Exports recovering with sustained momentum expected in near term
Margins improving as commodity cost inflation largely passed through
FY26 earnings adjusted for associate losses with higher FY27 growth assumed
Citi on ACC
In Dec-25, Ambuja’s Board approved two schemes of amalgamation: to merge with ACC and Orient Cement
ACC shareholders would receive 328 shares of Ambuja for every 100 shares of ACC
For ACC, appointed date is 1-Jan-26
Downgrade ACC to Neutral, in line with our recommendation for Ambuja, and they will likely trade in line with the merger swap ratio
Revised TP of ₹1,755 (₹2,750 earlier)
Ambuja mgmt reiterated cost focus and capacity growth; while both support a positive investment thesis
Remain on the sidelines given little historical precedence and lack of clarity on expansion plans
Merger with ACC may not change the narrative as ACC/Ambuja have largely been operating in line
JP Morgan on Delhivery
Recommendation: Overweight, Target: ₹600
Stock needs more love
Segment-wise performance was strong with Express parcel reaching 18% Service EBITDA margin mark
Delhivery Direct and other smaller segments offer growth potential
Capital intensity should continue to trend lower in the medium term
