There is a consensus view that the government could increase capex allocation by 10-15% for FY26.
Moreover, the Street will cheer the government sticking to a fiscal deficit target of 4.5%. Brokerages expect a slew of announcements for financials, defense, railways, power, health, consumption and automobiles.
“The budget is expected to prioritise high-speed rail projects, electrification, modernisation, and green initiatives, alongside enhancing tourism-focused routes,” Narinder Wadhwa, Managing Director & CEO of SKI capital said.
Here are stocks and themes that are expected to be in focus:
1) Railway
Antique Stock Broking expects outlay of Rs 2.7-2.8 lakh crore for FY26 which could be an 8-10% YoY increase. It anticipates increased allocation for the Vande Bharat trains and increased allocation for ‘Kavach’.The beneficiaries could be Siemens, L&T, Hitachi Energy, BEML, BHEL, Titagarh, RITES IRCON, RVNL, Railtel, HBL Power System, Kernex Microsystems, this brokerage said.Stocks like RVNL, IRCON International and Titagarh Wagons could benefit from rail modernisation, Wadhwa of SKI capital said.
Elara Capital also has a favourable view on Indian Railways which it said will be led by modernisation, upgradation and exports. Its stocks to buy are RITES, KEC International, Siemens. It has an ‘Accumulate’ rating on ABB, BEML.
The Kavach opportunity size is estimated at Rs 45,000 crore, Elara said while recommending investors to track HBL Engineering, Kernex Microsystems, Titagarh Rail Systems, Jupiter Wagons, Texmaco Rail, RVNL, IRCON, Kalpataru Projects, Kaynes Technology, Syrma SGS Technology, BHEL, Concord Control Systems and Quadrant Future Tek.
Also Read: Budget 2025: Can KAVACH be a game-changer for Siemens, Quadrant Future, and 4 more stocks?
2) Defense Sector
Mehta Equities expects Finance Minister Nirmala Sitharaman to increase its budget allocation for the defense sector from Rs 6.22 lakh crore last year. for India’s Ministry of Defence. HAL, BEL and Data Patterns are top plays for this brokerage.
Ski capital’s defense picks are Bharat Electronics (BEL), Hindustan Aeronautics (HAL), Mazagon Dock Shipbuilders, and Cochin Shipyard.
Bajaj Broking has its eyes fixed on DCX Systems.
3) Capex Sector
With the heightened government focus on developing the overall infrastructure of the country, particularly highways, railways and urban infrastructure, companies operating these segments are poised to encounter massive opportunities, Axis Securities said in a note. It has picked H.G Infra, RITES, KEC International, JKumar Infraprojects and Ahluwalia Contracts as budget stocks to buy.
The capex players like L&T, KNR Constructions and PNC Infratech poised for gains, this SKI said.
In the infra space, Larsen & Toubro (L&T) remains Mehta Equities’s top bet.
4) Automobile
Indian automotive industry is hoping for some level of rate rationalisation including a uniform GST of 18% on all auto parts, Mehta Equities said. The industry expects introduction of more initiatives like scrappage policy, PLI scheme for EVs and advanced technology components and expanding the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) II. Its top picks are Maruti Suzuki, Ashok Leyland and M&M.
Axis Securities’ top auto and ancillary stocks to buy are Maruti, M&M, TVS Motor, Bajaj Auto, Hero MotoCorp, Uno Minda, Exide Industries and Amara Raja Energy.
Tata Motors and Mahindra & Mahindra are its auto sector buys from SKI capital.
Also Read: Budget 2025: Auto stocks down by up to 40% from 52-week peak. Can these 3 grants by FM Sitharaman turn things around?
5) Hospital stocks
Announcements on medical tourism and incentives on research could trigger pharma stocks, says Axis Securities. Dr Reddy’s Laboratories, Lupin and Fortis Healthcare are preferred picks in the sector.
Apollo Hospitals is the healthcare play from Ski.
6) FMCG – Staple & discretionary
Consumption could also get a boost if the budget announces income tax relief, rural development outlays, or benefits for consumer durables and FMCG, Ski said as it picked Hindustan Unilever (HUL), Dabur and Voltas.
Elara has recommended Amber Enterprises as an EMS play.
7) Real Estate
The expectations of the real estate sector include an increase in tax deduction limit against home loans from Rs 2 lakh to Rs 5 lakh, revision of definition of “affordability” and encouragement to rental housing through incentives.
A further boost to affordable housing could boost the realty sector, says Mehta Equities as it picks Oberoi Realty, DLF, Godrej Properties as preferred stocks in this space.
In the real estate sector, the Ski capital’s preferred stocks are DLF, Godrej Properties, UltraTech Cement, and Embassy REIT.
Meanwhile, Axis’ realty stocks are Prestige Estates and Oberoi Realty.
Also Read: BEL, 14 smallcaps are most consistent budget-to-budget performers, deliver up to 15,802% returns in 5 years
8) BFSI
Mehta Equities said that for banks, focus could be on PSU bank privatisation and digitalisation perks. The State Bank of India (SBI) and ICICI Bank are preferred picks.
The thrust on capex and budget related announcements on MSMEs could trigger credit growth for banks and BFSI, said Axis Securities. The preferred stocks are State Bank of India (SBI), Bank of Baroda (BoB), Canara Bank, HDFC Bank, ICICI Bank, CreditAccess Grameen, Fusion MFI, Satin Creditcare, Spandana Sphoorty, SBI Life Insurance, HDFC Life Insurance, ICICI Pru Life, Power Finance Corporation (PFC) and REC.
9) Power sector
Axis Securities sees a government boost to India’s renewable energy sector and National Green Hydrogen Mission stamping its approval of Utilities & Power ancillaries. The recommendations are JSW Energy, NTPC, NLC India, Tata Power, Waaree Energies, Premier Energies, Inox Wind, Skipper, Power Grid Corporation and Genus Power.
10) Metal
Safeguarding duty on metals is likely to benefit steel and aluminium sectors. Axis Securities has recommended Tata Steel, SAIL, Hindalco Industries and National Aluminium Company (NALCO).
11) Tourism
Tourism industry expects tax exemption in LTAs among other measures. Indian Hotels is the top buy, Axis said.
Bajaj Broking is betting on Apeejay Surrendra Park Hotels.
12) Telecom
The government is considering a proposal to relax the quantum of adjusted gross revenue or AGR, dues owed to the exchequer by telecom companies. The beneficiaries will be Vodafone Idea, Bharti Airtel, says Antique Stock Broking.
“For Vi, this could mean a potential relief of Rs 52,000 crore, reducing about 75% of its outstanding AGR liability and roughly 25% of its total debt. For Bharti Airtel, the relief is estimated to be around Rs 38,000 crore.
Others
Bajaj Broking is positive on water management company Ion Exchange.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
