The countdown to the Budget, in terms of pure stock market action, has been rather muted. The benchmark indices, Nifty and Sensex, closed the week flat while the BSE midcap and the small cap indices outperformed the larger peers. BSE Metals, capital goods and Oil & Gas were the major gainers. However, Dalal Street’s attention right now is completely on what the Finance Minister will be announcing and what it means for the market.
Overall, most market observers believe that the expectations are measured. The Economic Survey presented a rosy picture of the economy with GDPGDP growth for FY26 pegged at 7.4% and between 6.8-7.2% in FY27. But the high capital inflows continue to be a concern. The market experts are hoping for some announcements by the FM that can reassure investors.
Will Finance Minister Sitharaman assuage investor concern?
Investors and market experts are almost unanimous in their expectation that they will welcome any possible move to resolve the pain points with regard to capital gains tax.
According to market veteran Arun Kejriwal, measures that can benefit “ longer term players who have been investing in market are welcome. Tinkering in the long-term tax rate last year may get reversed.”
Another respected voice in the market, Ajay Bagga pointed out that “Overall there needs to be cuts in STT, LTCG and STCG to boost the market sentiments; otherwise we could see some sell-off today. A weak rupee, weak numbers from China across manufacturing and services PMI, and weak cues from the metals pack could keep Budget day sentiment subdued.”
The big difference in capital gains tax computing
The big difference in computing of capital gains tax across asset classes has been a matter of concern for investors, especially given the volatility across asset classes recently. Vivek Jalan, Partner at Tax Connect Advisory Services, pointed out that, “single holding period for the purpose of computing capital gains for all asset classes” is what is expected.
The concerns arise as the taxation amount for the same holding period in different asset classes is different.Since the indexation has already been withdrawn for all asset classes, experts believe that there is not much rationale in keeping different tax rates for the same holding period across asset classes. The street is looking for announcements that can perhaps set the holding period uniformly as 12 months in this Budget.
Market looking for growth-orientated signals from the Finance Minister
Apart from this, market observers believe that investors would be watching out for signals that indicate GDP growth and continuation of earnings recovery.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments, explained that “If the 2026 Budget turns out to be fiscally prudent and growth-orientated, the market will turn resilient. The sharp correction in gold and silver, if it persists, can draw investors away from precious metals to equity. The inflation projected at 3.5% for FY27, the nominal GDP growth can touch 10%. This augurs well for corporate earnings in FY27.”
Shrikant Chouhan, Head Equity Research, Kotak Securities reiterated that, “In the coming week, Union Budget, commodity price movement, geo-political developments, currency movements, Q3FY26 results & management commentary and FII activity will influence Indian equity market.”
Market sentiment subdued
Overall, the markets are treading with a cautious tone ahead of the Budget.
Ajit Mishra – SVP, Research, Religare Broking pointed out that the, “market sentiment remained subdued amid lingering concerns over geopolitical tensions and global trade developments. Uncertainty ahead of the Union Budget, coupled with continued weakness in the Indian rupee, further added to the negative bias and kept participants on the sidelines.”
With all eyes on the Union Budget, he added that, “one can expect heightened volatility during the special trading session on Sunday and suggest preferring a hedged approach.”