Union Budget 2026-27 Latest Analysis: Sector Impact, Stock Winners & Losers

Overall, although there were no major positive surprises in the ‘Goldilocks’ budget, there was also a nasty surprise in the form of an STT hike in the F&O (Equities) segment, intended to discourage small retail amateur traders from participating amid the consistent suffering of huge losses.

The overall budget speech was shorter than usual, 90 minutes, but the theme continues to be reform & perform-the FM confirmed India’s ‘Reform Express’ is firmly on the right track, with a priority of reform over rhetoric; people over populism and action over ambivalence. The government is committed to three ‘kartavyas’ (duties): 

• Accelerate sustainable & competitive growth and higher productivity
• Empower people as partners in prosperity (ensure sabka saath, sabka vikas)-inclusive growth
• Focus on Yuvashakti (youth energy).

The FM boasted about India’s unparalleled economic growth in the last 12 years, from fragile five to fastest five, despite various cyclical global headwinds from COVID to the Ukraine war and the Trump (U.S.) tariff & trade war. In recent times, India’s economic trajectory has been marked by policy & macro stability, fiscal discipline, sustained growth and moderate inflation. The government is pushing for structural & process reforms, prudential fiscal & monetary policy, and public CAPEX (traditional & social infra). 

Keeping in mind the current environment of geopolitical fragmentations, the government is also pursuing domestic manufacturing resilience, energy security and reduced dependence on critical import-from critical minerals/rare earth materials to food, fertiliser, speciality chemicals, pharma APIs and also oil & gas. The government is also diversifying the source of the global supply chain to reduce strategic dependency on any single country/block.

The government is focused on ‘vocal for local’, self-sustainability, deregulation, smart regulation, price stability, maximum inclusive employment, agricultural productivity and an enhancement of the real disposable income of households. The government is embracing the adoption of new tech like AI to transform the production ecosystem, keeping the importance of human resources at the utmost. As the AI transformation is creating sharply higher demands for energy, water and critical materials/minerals, the government also reiterated its commitment to these strategic sectors for the larger goal of ‘Viksit Bharat-2047’.

India will continue to take confident steps towards Viksit Bharat, balancing ambition with inclusion. As a growing economy with expanding trade and capital needs, India must also remain deeply integrated with global markets, exporting more and attracting stable, long-term investment. The FM said that the aim is to transform aspiration into achievement and potential into performance to ensure inclusive growth for all sections of society.

The Indian Government has undertaken comprehensive economic reforms towards creating employment, boosting productivity and accelerating growth. After the Prime Minister’s announcement on Independence Day in 2025, over 350 reforms (both structural & process) have been rolled out. These include GST simplification, notification of Labour Codes, and rationalisation of mandatory Quality Control Orders. High Level Committees have been formed, and in parallel, the Central Government is working with the State Governments on deregulation and reducing compliance requirements. 

The government pegged the fiscal deficit at 4.4% of GDP in RE 2025–26 and budgeted 4.3% in BE 2026–27. The debt-to-GDP ratio is estimated to ease from 56.1% (RE 2025–26) to 55.6% (BE 2026–27), while reiterating the intent to move towards a 50±1% debt-to-GDP ratio by 2030–31. Total expenditure is budgeted at ₹53.5 lakh crore for 2026–27, up from ₹49.6 lakh crore in 2025–26 (RE). On the investment side, public capex is proposed at ₹12.2 lakh crore in 2026–27, compared with ₹11.2 lakh crore in BE 2025–26.

Although the targeted consumption relief (TCS cut to flat 2% on overseas tour packages, education & medical remittances) provides mild support, the absence of major income-tax slab changes or populist giveaways keeps the overall budget tone measured and prudent.

The FY27 budget sharpens focus on the six main intervention areas: 

• Scaling manufacturing in strategic & frontier sectors
• Rejuvenating legacy industries
• Creating champion MSMEs
• Powerful infrastructure push
• Long-term energy security & stability 
• Developing city economic regions. 

Sector Outlook & Key Impacts

1. Manufacturing & Strategic Sectors: Outlook- Strongest structural positive mid to long-term

The budget accelerates Atmanirbharta in frontier areas with large outlays and ecosystem building:

• India Semiconductor Mission (ISM) 2.0: ₹40,000 crore to produce equipment/materials; full-stack design; domestic IP; supply-chain fortification; industry-led R&D & training centres.
• Biopharma SHAKTI: ₹10,000 crore over 5 years to build a biologics/biosimilars ecosystem; 3 new NIPERs; 7 upgraded NIPERs; 1,000+ accredited clinical trial sites; CDSCO strengthening.
• Biopharma Shakti - customs duty exemption on 17 life-saving drugs, 3 new All India Institutes of Ayurveda, 5 regional medical hubs, 1.5 lakh caregivers trained.
• Container manufacturing scheme: ₹10,000 crore over 5 years
• Rare-earth corridors in Odisha, Kerala, Andhra Pradesh, Tamil Nadu
• Chemical parks (3 dedicated clusters via challenge route)
• Capital goods & construction equipment enhancement scheme

Positive Impact Stocks: Mid to long term

• Semiconductors & Electronics: BEL, Dixon Technologies, Kaynes Technology, CG Power, MosChip — strong momentum expected from ecosystem deepening.  
• Biopharma & Pharma: Neuland Laboratories; Sun Pharma, Biocon, Dr Reddy’s, Divi's Laboratories — direct beneficiaries of ₹10,000 crore push and trial-site network
• Hospitals & Medical Tourism: Global Health -Medanta, Apollo Hospitals, Max Healthcare.  
• Capital Goods: Larsen & Toubro, Siemens, ABB, KEC International — sustained capex tailwind.

2. Infrastructure & Logistics- Outlook: Sustained positive momentum

• Capex raised to ₹12.2 lakh crore, 
• Infrastructure Risk Guarantee Fund, dedicated REITs for CPSE asset recycling
• Dankuni-Surat freight corridor,
• Twenty new national waterways over 5 years (with a ship repair ecosystem at Varanasi & Patna), and 
• Seven high-speed rail corridors (Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bengaluru, Hyderabad-Chennai, Chennai-Bengaluru, Delhi-Varanasi, Varanasi-Siliguri)-all reinforce the infra-led growth story.

Positive Impact Stocks: Potential for short to mid-term 

• Railways & EPC: RVNL, IRCON, Titagarh Rail Systems, and Texmaco Rail — long-term order pipeline from high-speed corridors & freight DFC
• Logistics & Ports — CONCOR (container scheme positive), Adani Ports and Gujarat Pipavav
• Infra Developers — Larsen & Toubro (L&T), NCC, and Ashoka Buildcon

3. MSMEs & Women Entrepreneurship: Outlook: Constructive liquidity & equity support

• ₹10,000 crore SME Growth Fund 
• ₹2,000 crore Self-Reliant India Fund top-up
• Mandatory TReDS for CPSE purchases
• CGTMSE guarantee for invoice discounting, GeM-TReDS integration
• Corporate Mitras training improves liquidity & compliance (for a ‘reasonable service  
• SHE MARTs and Lakpati Didi expansion support women-led enterprises
• ₹10,000 crore SME Growth Fund, ₹2,000 crore Self-Reliant India Fund top-up, mandatory TReDS for CPSE purchases, CGTMSE guarantee for invoice discounting, GeM-TReDS integration, and Corporate Mitras training improve liquidity & compliance. SHE MARTs and Lakpati Didi expansion support women-led enterprises.

Positive Impact Stocks: Mid to long-term

• MSME-linked mid/small-caps: Apar Industries, Banco Products, Blue Star, Greaves Cotton, Polycab India, Supreme Industries.  
• Financials with MSME exposure:  Bajaj Finance, Cholamandalam, and Ugro Capital.

Textiles & Labour-Intensive Sectors-Outlook: Targeted revival package

• Integrated programme (National Fibre Scheme, Textile Expansion & Employment Scheme, National Handloom & Handicrafts Programme, 
• Text-ECON, SAMARTH 2.0), mega textile parks in challenge mode (focus on technical textiles), and the Mahatma Gandhi Gram Swaraj initiative.

Positive Impact Stocks  

• Integrated & Export-Oriented: Arvind, KPR Mill, Vardhman Textiles, Trident, Welspun Living, and Gokuldas Exports
• Technical Textiles: Garware Technical Fibres, SRF.

4. Digital, IT & Cloud Services: Outlook: Long-term FDI magnet

• Tax holiday till 2047 for foreign cloud providers using Indian data centres + 15% safe harbour for related entities 
• IT safe harbour at 15.5% (single category, ₹2,000 crore threshold, automatic approval)
• Positive selective buying in digital infra & IT services

Positive Impact Stocks  

• Data Centres & Cloud: AdaniConneX, Nxtra (Airtel), and Sify Technologies
• IT Services — Zensar Technologies, TCS, Infosys, and Wipro

5. Healthcare, AYUSH & Medical Tourism: Outlook: Multi-dimensional push

• Biopharma Shakti (₹10,000 crore)
• Customs duty exemption on 17 life-saving drugs
• 3 new All India Institutes of Ayurveda
• 5 regional medical hubs
• 1.5 lakh caregivers trained

Positive Impact Stocks  

• Hospitals & Medical Tourism: Global Health (Medanta), Apollo Hospitals, and Max Healthcare
• Pharma: Neuland Laboratories, Biocon, and Sun Pharma.

6. Defence Sector Outlook (₹7950 allocation)

• Multi-year tailwind for indigenisation, private sector participation, and export growth.  
• Strong indirect support via strategic manufacturing (semiconductors, rare-earths, capital goods) and logistics enhancements.  
• No negative surprises (no capex cut, no windfall tax, no FDI restriction) — continuity with the “Atmanirbhar Bharat” defence manufacturing push.

Positive Impact Stocks: Defence PSUs & Large Integrated Players  

• Hindustan Aeronautics Ltd (HAL): Benefits from high-speed rail signalling/electronics, semiconductor ecosystem, and export orders.  
• Bharat Electronics Ltd (BEL): Direct winner from ISM 2.0 (defence radar, communication, missile systems) and rare-earth corridors.  
• Bharat Dynamics Ltd (BDL):  Missile systems gain from electronics & rare-earth supply-chain strengthening.

Private Defence & Aerospace  

• Larsen & Toubro (L&T): Dominant in defence infra (shipbuilding, artillery, aerospace), capex continuity, and CIE scheme  
• Paras Defence & Space Technologies: Optics, electronics, defence components benefit from semiconductor & rare-earth focus
• Data Patterns (India): Defence electronics & radar systems — strong tailwind from ISM 2.0
• Astra Microwave Products: Radar, missile electronics — direct beneficiary of strategic sector push

Potential Losers & Underperformers

Derivatives & Broking — STT hike on F&O

• MCX (should recover as STT hike only on Equity FNO, not commodities)
• BSE, BSDL, CSL, Angel One and other broking/capital market-related stocks may suffer.

Metals & Commodities — Global weakness + silver futures tumble - Hindustan Copper; Hindustan Zinc; VEDL. 

Conclusion 

The FY27 budget is Goldilocks in nature, but the unexpected hike in STT on equity futures & options has spooked the market; the fine print may be suggesting short-term pain and long-term gain. India’s structural tailwinds continue to be robust despite some cyclical headwinds.