Daily Voice: Balancing consumption boost, fiscal consolidation, capex seen as core themes for Budget 2026, says Ambit's Trilok Agarwal

Trilok Agarwal is the Fund Manager – Equity at Ambit Asset Management

• Government expected to stick to its fiscal consolidation path despite high debt levels
• Don’t expect any tweaks to capital gains tax in upcoming budget
• Believe FY27 EPS growth will be in low double-digit instead of mid-teens

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Balancing the three C’s – consumption boost, fiscal consolidation and capex – can be seen as the core themes for the FY27 budget, said Trilok Agarwal, the fund manager – equity at Ambit Asset Management in an interview to Moneycontrol.

He believes FY27 EPS growth will be in the low double-digit instead of mid-teens, leading to expectations of earnings normalisation rather than acceleration.

Financials and consumption should see better growth next fiscal, according to him.

What could be the key considerations in the Union Budget, given tariff concerns and ongoing geopolitical tensions?

Fiscal discipline and consolidation will be a key feature with the Government expected to stick to its fiscal consolidation path despite high debt levels.

Balancing the three C’s – Consumption boost, fiscal Consolidation, and Capex – can be seen as the core themes for the FY27 budget.

Do you think the government may tweak capital gains policies in the Union Budget?

We don’t expect any tweaks to capital gains tax in the upcoming budget.

Are you confident about consumption growth in FY26 and FY27?

GST rationalisation and relief to income taxpayers will have an impact on consumption in FY26 and FY27. Other factors are improving rural demand is expected to remain stable (underpinned by a good monsoon), and urban employment appears to be bottoming out.

Given expectations of 15–16 percent earnings growth in FY27, which sectors do you see as the key drivers of this growth?

We believe FY27 EPS growth will be in the low double-digit instead of mid-teens, leading to expectations of earnings normalisation rather than acceleration. Financials and consumption should see better growth next fiscal.

Are you betting on defence stocks, and do you expect strong earnings growth in the sector?

With rising geopolitical risks across the globe, defence is no longer just a theme but a matter of national security. Growth will continue as the Government focuses on indigenisation and higher allocations. We are selectively investing in the sector.

Do you think global factors alone are responsible for the recent sharp depreciation in the rupee?

Global factors are seen as a primary driver of the anticipated depreciation. An uncertain and punitive tariff imposed by the US on India also weakened the INR.

Do you see the possibility of strong private capex over the next few years, and would you consider allocating fresh capital to capital goods?

While the Government has done the heavy lifting for years through massive public spending on infrastructure, the private sector has shown selective signs of picking up, though not yet broad-based. We think strong growth is still some time away, as utilization levels are still hovering at 74-75 percent.