The furore around the STT hike in the Budget has finally settled down. However the Union Budget 2026, presented by Finance Minister Nirmala Sitharaman was a lot more beyond that. As Motilal Oswal highlighted, it laid out a steady fiscal roadmap. The brokerage house pointed out that the broader fiscal math remains realistic and achievable, with clear implications for sectors, bonds, and select stocks.
Let’s take look at the Motilal Oswal’s preferred picks and focus sectors in the aftermath of the Budget announcement-
Stocks and sectors Motilal Oswal prefers
The brokerage expects markets to move past Budget-related noise and refocus on earnings growth. The brokerage expects around 12% earnings growth for the Nifty index over FY25-27.
It remains overweight on automobiles, diversified financials, technology, discretionary consumption, and electronics manufacturing services.
However, the brokerage remains neutral on public sector banks, healthcare, capital goods, infrastructure, and cement, while staying underweight on private banks, fast-moving consumer goods, oil and gas, utilities, and metals.
As per the brokerage report, the top Nifty 50 stock ideas include State Bank of India, Titan Company, Mahindra & Mahindra, Infosys, and Eternal. Among non-Nifty stocks, Motilal Oswal prefers Dixon Technologies, Indian Hotels, Groww, TVS Motor, and Radico Khaitan.
Motilal Oswal on Budget 2026: Sector impact – Winners, neutrals, and pressure points
Motilal Oswal classified sectoral impact in its report. Capital markets faced a setback due to the Securities Transaction Tax (STT) hike on Futures and Options, which the brokerage said could hurt trading volumes and flows. The report stated that “Capital Markets is the most impacted” following the tax change.
Most other sectors were seen as neutral. These include real estate, consumption, cement, consumer durables, infrastructure, logistics, metals, oil and gas, telecom, and automobiles.
On the positive side, Motilal Oswal highlighted utilities linked to data centres, battery storage, solar power, nuclear energy, and carbon capture. Agriculture, aviation, tourism, healthcare, semiconductors, electronics manufacturing services, defence, and chemicals also feature among sectors expected to benefit over time.
One of the key announcements, according to the report, was the government’s push to attract global investment into data centres. Motilal Oswal noted that “the proposed tax holiday of 22 years is unprecedented”, though it added that the theme will play out over the long term rather than immediately.
Motilal Oswal on Budget 2026: Stable numbers, limited room for surprises
According to Motilal Oswal, the government kept its assumptions grounded. Nominal Gross Domestic Product (GDP) growth has been pegged at 10%. This is in line with the Economic Survey estimate of 6.8%-7.2% real growth. Fiscal consolidation continues, though at a slower pace.
The fiscal deficit target for FY26-27 has been set at 4.3% of GDP, slightly lower than 4.4% estimated for the revised estimates of the previous year. The debt-to-GDP ratio is projected at 55.6% for FY27, with a longer-term goal of reaching around 50% by FY30–31.
Motilal Oswal in its report noted that while the overall math appears sound, the surprise came from borrowing numbers.
The report highlighted that “the negative surprise was the higher gross market borrowing of Rs 17.2 trillion”, compared to market expectations of Rs 16-16.5 trillion. However, it added that this could ease during the year with Reserve Bank of India buybacks and conservative assumptions on small savings.
Motilal Oswal on Budget 2026: Capex stays in focus
A key theme of the Budget, according to the brokerage, is capital expenditure. The government has budgeted capital spending of Rs 12.2 trillion for FY27, an 11.5% year-on-year increase. This equals around 3.1% of GDP and remains broadly in line with expectations.
Motilal Oswal pointed out that defence received the highest push, with capital expenditure rising 18% year-on-year to Rs 2.2 trillion. Railways, roads, and highways also saw steady allocations.
At the same time, rural spending is seeing a renewed push. According to the brokerage, government rural expenditure is expected to rise nearly 12% year-on-year. This is driven mainly by schemes such as Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and village-focused programmes. In contrast, subsidies on food, fertiliser, and petroleum are budgeted lower.
Motilal Oswal on Budget 2026: Bond market and interest rates
On the debt market side, Motilal Oswal said the higher borrowing number could weigh on sentiment initially. The brokerage expects the Reserve Bank of India to play an active role through liquidity measures and open market operations.
The next key trigger, it said, will be the Reserve Bank of India’s monetary policy meeting. Market expectations include liquidity support and a possible final 25 basis point rate cut. Over the medium term, Motilal Oswal expects the 10 year government bond yield to move toward 7% by March 2027.
Conclusion
Overall, the brokerage believes the Budget sets a steady base rather than delivering fireworks. Moreover, the market attention will now shift back to corporate earnings and global cues.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.