Why Sunil Subramaniam sees Budget 2026 as a game-changer for the stock market

As India heads into Budget 2026 amid weak equity sentiment, market expert Sunil Subramaniam sees an opportunity for reform-driven optimism. Nifty 50’s 3% slide in January, largely due to FII outflows, has sparked pre-budget caution. Yet Subramaniam believes low expectations could turn the Budget into a positive market trigger.

“Three answers to that — reform, reform, and reform,” he said, noting the economy has faced “a very tough year” marked by geopolitical tensions, high tariffs, and FII pullouts. Despite these challenges, fiscal management remains strong. “The very low expectation means that anything that the budget delivers will be taken positively by the market. It cannot get worse than this… So, I think that it will turn out to be a good booster overall for the economy, he said.

AI-focused reforms could draw foreign capital back, Subramaniam believes. “One of the reasons FIIs have pulled out…was because India is seen as a hedge against the AI boom that is happening in the world… If the government in the budget puts through a mega AI readiness plan…maybe some amount of foreign capital could come back.”

According to him, reviving private capex is another key area that the Budget 2026 should focus on. “It is time private capex came to the party…private capex will be ready to go, but government if they can support it in two ways – one is expand the PLI scheme… The second would be to help finance this capex… public sector banks have to pick up the burden of long-term financing…” Subramaniam said.

Subramaniam sees consumption-linked sectors benefiting from continued government support. “For me contra pick is realty because that is the one which has not at all benefited from the GST yet… I see that realty…public sector banks…and consumer durables…these would be my thing.” He added that broadening GST cuts or increasing standard deductions could help shift the recovery from a K-shaped to a U-shaped trajectory.

With markets entering the Budget on subdued expectations, even incremental reforms could act as a catalyst. “The shift in the government’s thinking that we need to give money in the hands of people…to make that K-shaped recovery into a U-shaped recovery…”