Daily Voice: Capex continuity and fiscal credibility reassure more than aggressive Budget stimulus, says Amnish Aggarwal

Amnish Aggarwal is the Director- Research, Institutional Equities at PL Capital

• Given global geopolitical backdrop, investors not expecting aggressive stimulus
• Clarity on capex continuity, sectoral incentives, and fiscal credibility would be more reassuring
• Stable, reform-oriented Budget can reinforce earnings visibility and confidence

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According to Amnish Aggarwal, the Director- Research, Institutional Equities at PL Capital, the priority of the Union Budget should be to sustain growth momentum while preserving fiscal discipline.

With inflation under control and monetary easing already in place, the Budget’s role should focus on capital expenditure, infrastructure creation, and structural reforms that promote and increase private investment, he said in an interview with Moneycontrol.

He believes a stable, reform-oriented Budget can reinforce earnings visibility and confidence, even if it does not spark a sharp near-term rally.

Amnish Aggarwal remains constructive on the pharmaceutical and auto sectors. Banking and financial services continue to be a core area of conviction, he said.

If you were the Finance Minister, what would be your key priorities for the Union Budget 2026?

The priority should be to sustain growth momentum while preserving fiscal discipline. With inflation under control and monetary easing already in place, the Budget’s role should focus on capital expenditure, infrastructure creation, and structural reforms that promote and increase private investment.

Rather than headline tax changes, emphasis on manufacturing, defence, energy transition, and logistics-led productivity gains would support long-term economic resilience.

Do you believe the Union Budget can provide meaningful relief to the markets?

The Budget’s impact on markets is likely to be more directional than immediate. Given the global geopolitical backdrop, investors are not expecting aggressive stimulus. Instead, clarity on capex continuity, sectoral incentives, and fiscal credibility would be more reassuring. A stable, reform-oriented Budget can reinforce earnings visibility and confidence, even if it does not spark a sharp near-term rally.

Do you think market sell-offs driven by global events typically present the best investment opportunities?

Yes, global event-led corrections often create valuation-led opportunities, especially when domestic fundamentals remain supportive. India’s macro environment—marked by improving demand, lower inflation, and policy stability—suggests that recent volatility has been driven more by external factors than by any deterioration in local conditions. Such phases tend to reward disciplined, long-term investors focused on quality businesses.

Are you becoming more constructive on mid- and small-cap stocks amid the current market correction?

The correction has brought greater valuation discipline, particularly in the mid- and small-cap universe. While large caps are still preferred for near-term stability, selective opportunities are emerging in smaller companies with strong balance sheets, earnings visibility, and domestic demand exposure. However, the approach remains bottom-up, avoiding areas where earnings expectations remain vulnerable or valuations are still stretched.

Are you significantly bullish on the banking and financial services sector?

Banking and financial services continue to be a core area of conviction. Credit growth is improving, asset quality remains stable, and capital adequacy across major lenders is healthy. Incremental lending is increasingly driven by MSMEs, corporates, and secured retail segments. Large private banks and well-managed NBFCs are well positioned to benefit from both cyclical recovery and structural financialisation.

How do you assess the December quarter earnings reported so far? Have the results met your expectations?

December quarter results have been mixed but broadly encouraging. While demand trends were uneven across sectors, earnings growth has been supported by financials, metals, and select consumption-linked segments. Margin pressures persisted in some consumer and healthcare names, but overall corporate performance indicates resilience rather than stress, keeping medium-term earnings expectations largely intact.

Do you expect earnings surprises from steel companies in Q4 FY26, following the recent rally in metal prices?

There is scope for positive earnings momentum in Q4, driven by higher volumes and better realisations, even as input costs remain elevated. Steel companies could benefit from operating leverage if current price trends sustain. That said, earnings outcomes will remain sensitive to global demand conditions and export dynamics, making sector exposure best approached selectively.

Are you overweight on pharmaceuticals, as well as the auto and auto ancillary sectors, for 2026?

We remain constructive on both spaces. Pharmaceuticals are supported by steady domestic and global demand, even though margins may remain under pressure in the near term. Autos and auto ancillaries stand out due to strong domestic demand, premiumisation, EV-related opportunities, and export recovery, positioning them well for the 2026 earnings cycle.