Budget should explain government's long-term structural road map: Prashant Khemka, WhiteOak Capital

Prashant Khemka, WhiteOak Capital Management

• Prashant Khemka: Market in consolidation, not deeper stress.
• Markets eye Union Budget for long-term reforms over short-term gains.
• Key priorities: defence, semiconductors, and business ease

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Markets may appear jittery, but the current phase should be viewed as consolidation rather than a sign of deeper stress, according to Prashant Khemka, founder and MD of WhiteOak Capital in an exclusive conversation with Moneycontrol's N Mahalakshmi. Further, he added that the markets will look towards the Union Budget for its next set of cues

Looking ahead to the Union Budget, he believes markets are less concerned about near-term earnings support and more focused on long-term intent. Incremental tax tweaks or sector-specific incentives, in his view, may deliver only fleeting rallies. What investors are watching for instead is a clear structural roadmap.

Khemka highlighted three priorities: sharply higher defence spending to strengthen strategic infrastructure, accelerated semiconductor self-reliance to reduce dependence on a handful of countries, and deeper reforms to ease of doing business, particularly land acquisition and regulatory complexity.

Defence spending, currently around 2 percent of GDP, should move meaningfully higher over time, he argued, while semiconductors may require a strong government-led push "given how far India lags globally."

"We need to substantially ramp up our defence budget. It has been stuck at around 2 percent of GDP for quite some time. While India has spent heavily on physical infrastructure, defence is the most critical form of infrastructure. Recent global developments underline just how essential it is," he said.

Defence spending should be at least double its current share of GDP, ideally moving towards 4-5 percent, which is where many countries globally are heading. "Given India’s geopolitical position and its northern neighbours, we should arguably be at the higher end of that range. While it is not realistic to double spending overnight, there should be a clear roadmap or a strong initial push in that direction," he added.

Second is self-reliance, which is closely linked to geopolitics. Recent years have shown that we cannot afford to be dependent on one, two or three countries for any critical imports. Diversified sourcing reduces risk, but heavy dependence on a handful of countries is not sustainable. Defence is the most obvious area for indigenisation, but this challenge goes far beyond defence.

"Take semiconductors. Chips are integral to almost everything we use today - mobile phones, computers, machinery, automobiles, security systems and more. India currently imports most of its semiconductors from a very small set of countries in Asia, including China. This is not sustainable if we aspire to be a global power," Khemka said. Any dependence on two or three countries, especially when one is a strategic rival and another faces geopolitical risk, is a serious vulnerability.

According to him, India is already 30 years behind in semiconductors, if not more. While initiatives such as the PLI scheme have helped us make a start over the past two to three years, what is needed is a massive push.

"I am generally not a supporter of government entering areas where the private sector can lead, but given how far behind we are, there is a strong case for a government-backed semiconductor effort. Private capital alone may not bridge this gap. We need a long-term roadmap over the next five to ten years to significantly reduce dependence on countries such as Taiwan, China and Korea for chips," he said.

On the markets front, after delivering exceptional returns in the years following the Covid-19 lows, Indian equities have largely moved sideways for the past 15-18 months, a period he describes as “disappointing but normal.”

Khemka cautioned against over-interpreting short-term market moves, including the weak start to 2026. Trailing 12-month returns for the Nifty, he notes, are around 9 to 10 percent including dividends, broadly in line with long-term averages. “Markets don’t follow the calendar,” he says, adding that past returns will offer little insight into the future.

On earnings, Khemka expects FY26 growth to remain in high single digits, with FY27 likely tracking nominal GDP growth in the low double digits. While near-term visibility remains mixed, he believes markets will reward credible structural reform even if it comes without immediate earnings upside.

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