From Defence to EVs: Here are top 10 themes that will dominate in Budget 2026

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As the Union Budget 2026 draws closer, expectations are firmly anchored around continuity rather than headline-grabbing announcements. Market participants anticipate the government will stay committed to fiscal discipline, with the focus shifting decisively toward reform implementation and execution, instead of large spending shocks.

While Budget Day could trigger short-term volatility, analysts believe the medium-term market trajectory will continue to be shaped by earnings visibility and liquidity conditions.

Vinit Sambre, Head of Equities at DSP Mutual Fund, notes that limited fiscal headroom leaves little room for aggressive outlays. According to him, the Budget is more likely to prioritise accelerating structural reforms and crowding in private investment rather than unveiling big-ticket spending programmes.

Against this backdrop, sectors such as defence, railways, infrastructure, exports, real estate and consumption-linked plays are expected to dominate Budget 2026 narratives and drive stock-specific action.

Defence

Defence remains a structural focus area in every Budget. Although the sector has delivered strong returns over recent years, valuations have corrected 15–20 percent from recent peaks as execution expectations have moderated. Ambit Capital believes a major upside surprise is unlikely in Budget 2026, though recent geopolitical developments, including Operation Sindoor, have revived expectations of a steady rise in defence spending.

The market is currently pricing in defence budget growth of around 8–10 percent as a comfortable outcome. With order books already elevated, execution remains the key challenge, as delays in order finalisation continue to stretch timelines. Amit Anwani, Vice President and Lead Analyst (Capital Goods) at PL Capital, told Moneycontrol that investors will closely track decisions taken by the Defence Acquisition Council going forward.

Railways

In Budget 2025–26, capital expenditure for Railways was maintained at Rs 2.52 lakh crore. By the end of December 2025, over 80 percent of this allocation, Rs 2.03 lakh crore, had already been utilised, highlighting strong execution.

The government has outlined plans to construct 1,000 road over-bridges and under-bridges, expand rolling stock, and introduce 50 Namo Bharat, 100 Amrit Bharat, and 200 Vande Bharat trains. For Budget 2026, experts expect higher allocations toward track upgrades and signalling to support semi-high-speed operations. Industry estimates point to a calibrated 5 percent increase, taking the rail outlay to around Rs 2.65 lakh crore. Stocks such as RVNL, IRCON International, and Jupiter Wagons are likely to remain in focus.

Infrastructure

Infrastructure continues to be the government’s primary growth lever. Axis Securities expects execution to take precedence over fresh announcements, while ICICI Securities believes public capex will remain concentrated in roads, railways, defence and power infrastructure.

In the previous Budget, overall capex was raised to Rs 11.2 lakh crore for FY26, with major allocations for roads (Rs 2.72 lakh crore), railways (Rs 2.52 lakh crore) and defence capital expenditure (around Rs 1.8 lakh crore). Axis Direct expects a 9-10 percent year-on-year increase for the Ministry of Road Transport and Highways. Additionally, the Centre is considering a Rs 25,000 crore safety buffer for infrastructure projects. Larsen & Toubro, Siemens India, ABB India, and BHEL are seen as key beneficiaries, supported by strong order inflows.

Export-oriented sectors

Global tariff pressures have weighed on exports such as textiles, seafood, gems and jewellery, and auto components. To mitigate the impact, the government has announced Rs 45,000 crore in approved initiatives, while lenders sanctioned Rs 3,361 crore under the Rs 20,000 crore export credit guarantee scheme in just one month, according to reports.

ICICI Securities expects continued policy support for labour-intensive sectors in Budget 2026. The PLI allocation for textiles is estimated to rise sharply from Rs 500 crore in FY25 (RE) to around Rs 1,150 crore in FY26 (BE). For food processing, the PLI outlay is pegged at approximately Rs 1,200 crore in FY26, up from Rs 700 crore in FY25 (RE). Stocks such as Gokaldas Exports, Avanti Feeds, Apex Frozen Foods and Welspun Living are expected to benefit.

Automobiles

With income tax relief up to Rs 12 lakh already in place and GST rationalisation helping lower vehicle prices, analysts expect Budget 2026 to support a gradual recovery in auto demand. Axis Direct expects a stable tax regime, improved affordability and stronger volumes, particularly in mass-market and two-wheeler segments.

Auto exporters could also benefit from continued support under the Rs 7,000 crore global value chain initiative, aimed at boosting localisation and logistics. Maruti Suzuki, TVS Motor, Eicher Motors, Bajaj Auto and Hero MotoCorp remain key stocks to watch.

Electric mobility

India’s electric vehicle adoption has moved well beyond pilot stages, with EV sales crossing 2.3 million units last year. Sustaining this momentum will require continued investment in charging infrastructure and policy stability.

Axis Direct expects strong support to continue under the PM E-DRIVE scheme, which has an outlay of Rs 10,900 crore until March 2028. In the previous Budget, Rs 4,000 crore was allocated toward expanding charging infrastructure, supporting domestic EV manufacturing and reducing import dependence.

Consumption

Consumption has begun to recover, aided by tax relief, easing inflation and welfare transfers. Rural demand has led the rebound, while urban demand remains uneven.

In Budget 2026, FMCG and retail companies are seeking measures that protect purchasing power in price-sensitive segments. Stable import duties on key inputs and support for domestic manufacturing could help ease cost pressures and sustain margins.

Semiconductors and electronics

For semiconductors and electronics, the focus is expected to shift from announcements to execution. Industry players are pushing for faster implementation of approved projects, improved testing infrastructure and continued support under schemes such as the India Semiconductor Mission and the Design Linked Incentive programme.

Despite policy momentum, India continues to import nearly all the chips it consumes. Experts believe Budget 2026 must prioritise incentives for domestic consumption, funding for mature-node technologies and preferential support for Indian-designed chips. Stocks such as Moschip Technologies, Tata Elxsi and SPEL Semiconductor could be key beneficiaries.

Real estate

The real estate sector has started the year on a weak footing, with housing sales declining for four consecutive quarters. The December quarter recorded the lowest sales in nearly 16 quarters, with demand largely concentrated in the premium and luxury segments.

Affordable and mid-income housing continues to face headwinds. Axis Direct expects the government to focus on extending and strengthening schemes such as PMAY–Housing for All. Measures including stamp duty rationalisation, higher tax deductions and GST tweaks could offer support. Prestige Estates and Oberoi Realty may benefit in the premium segment, while Godrej Properties and Puravankara remain key affordable housing plays.

Chemicals and fertilisers

Analysts expect Budget 2026 to address long-standing issues in the fertiliser sector, including uniform taxation, faster input tax credit refunds and a simplified licensing framework. While food subsidies are likely to remain, the emphasis may gradually shift toward higher spending on farm infrastructure and greater public–private participation to improve productivity and long-term growth. Stocks such as FACT, RCF and Coromandel Fertilisers are likely to be in focus.

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