Our View Post FY27 Budget: Stability, Selectivity and Execution
A fiscally disciplined framework supports earnings-led equity opportunities, a carry-focused fixed income stance and selective sectoral leadership.
The FY27 Budget reinforces macro stability and fiscal discipline while maintaining a strong emphasis on public capex. Policy support is broad-based, spanning transport and logistics,
manufacturing, defence, energy transition, services, tourism and rural development. Targeted tax and customs measures lower input costs for strategic sectors and support domestic
value creation. While near-term stimulus is limited, the budget strengthens policy continuity and medium-term growth visibility across a wide set of sectors.
Our View: Equities
Indian equities are transitioning into an earnings-driven phase, with valuation excesses having moderated and FY27 earnings visibility improving, particularly across large caps
and select SMIDs .
The absence of populist giveaways in the Budget supports macro credibility and reduces the risk of policy slippage, which is positive for valuation sustainability. We expect
market leadership to remain selective rather than broad-based, favouring companies aligned with capex, manufacturing, services exports and domestic infrastructure themes.
Near-term volatility should be viewed as an opportunity to gradually deploy capital, rather than wait for sharp corrections.
Our View: Fixed Income
Fiscal prudence in the FY27 Budget preserves policy space for the RBI, especially as inflation remains comfortably below target and growth risks are balanced . However, with
rate cuts largely priced in and liquidity conditions still episodic, fixed income should not be played aggressively from a duration standpoint.
We continue to prefer high-quality accrual strategies over tactical duration calls, as they offer better risk-adjusted outcomes through carry, lower volatility and improving credit
fundamentals.
Overall, the Budget reinforces fixed income’s role as a stability and carry anchor, rather than a source of sharp capital gains.
Sectors to Watch Out For
Considering the FY27 Budget in its entirety, we do not see major sector-specific shifts or disruptive policy changes. Instead, the policy approach remains incremental and
continuity-driven.
That said, sectors aligned with sustained capex execution, strategic self-reliance and cost competitiveness—such as transport and logistics, capital goods, defence, electronics
manufacturing, pharmaceuticals and healthcare, along with energy transition and data-centre-linked infrastructure—are better positioned to benefit.
Sectoral outcomes are therefore likely to be shaped more by execution and earnings delivery than by headline budget announcements.
FY27 Union Budget: Summary
Building India’s Next Phase of Structural Growth
Sources and Uses of the Rupee
A balanced revenue mix with selective offsets, supporting development-led spending within a disciplined fiscal framework.
Expenditure on Major Items
FY27 expenditure mix highlights increased emphasis on transport-led capex, while sustaining defence and rural priorities
Fiscal Consolidation with Capex Continuity
Deficit reduction remains on track, while revenue growth and capex expansion support medium-term earnings visibility.
