As Finance Minister Nirmala Sitharaman prepares to present Union Budget 2025-26 on Saturday, the government’s focus is expected to be on fiscal consolidation, infrastructure spending, and sector-specific incentives, according to top global brokerages and global financial institutions.
According to Jefferies, consumer discretionary spending could be boosted by income tax cuts, and rural recovery may see positive sentiment from welfare scheme expansions.
Expansion of electronics production-linked incentives or semiconductor manufacturing schemes are positive for electronics manufacturing services stocks while an increase in renewable energy (RE) scheme allocations and tweaks in solar cell or module duties are awaited, said Jefferies in its note.
Boost to welfare schemes can be sentimentally positive for further rural recovery. The brokerage also expects a potential hike in foreign portfolio investment limit in banks and insurance companies to 100 per cent, up from the current 74 per cent.
Expansion of the interest subsidy scheme for urban housing is expected, which can be a positive for affordable housing lenders, according to the brokerage, which added that tobacco taxation changes are unlikely in this Union Budget.
According to CLSA, any hike in excise duty on auto fuels may hit the margins of Indian Oil, Bharat Petroleum and Hindustan Petroleum, while LPG subsidy in the budget may prove to be a relief.
Increased allocations for infrastructure projects, any hike in import duty on steel, and a cut in duty on coking coal could benefit steel producers, it said.
A Bank of America note said that revenue growth may maintain a steady pace.
“Debt, not deficits, could be the ‘mantra’ going forward. Fiscal policy easing is likely to be on flow. GDP growth partly hinges on a revival of capex spending,” it noted.
Macquarie said the government may impose import or safeguard duties to counteract the dumping of commodities from China.
According to Morgan Stanley, key things to watch are the extent of fiscal consolidation, physical and social infrastructure and sector-level incentives or spends.
The Union Budget will be presented by Finance Minister Sitharaman on February 1.
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