Daily Voice: Focused push in Budget 2026 to fast-track PSU privatisation could be a game changer, says Entrust’s Karthik

Karthik S is the Head of Product and Research at Entrust Family Office

• Union Budget likely to do fine-tuning existing schemes, reallocating spending toward high-multiplier areas
• Budget to maintain fiscal discipline, support to export segments impacted due to tariffs
• Focused push in budget to fast-track PSU privatisation could be a game changer

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According to Karthik S, the Head of Product and Research at Entrust Family Office, the focus in Union Budget is likely to be on fine-tuning existing schemes, reallocating spending toward high-multiplier areas, maintaining fiscal discipline, and possibly added support to export segments impacted due to tariffs.

A focused push in this budget to fast-track PSU privatisation which will unlock value, improve efficiency, and increase competitiveness could be a game changer, he believes.

On the recent rangebound market action, he is of the view that if earnings recovery broadens, market breadth is likely to improve. "Key drivers for market performance in 2026 include positive progress on tariffs, a strengthening earnings outlook, and stable geopolitical conditions," he said in an interview to Moneycontrol.

Do you expect meaningful reforms in the Union Budget, even after the government has announced several measures in recent months to boost economic and earnings growth? Which single focus area could be a game changer?

This year’s Budget will be under focus amid geopolitical tensions, and trade disruptions. With several growth-supportive measures already announced, such as continued focus on capex with faster infrastructure rollout, Direct tax benefits and GST rationalisation, expectations should hinge more towards measured reforms.

The focus is likely to be on fine-tuning existing schemes, reallocating spending toward high-multiplier areas, maintaining fiscal discipline, and possibly added support to export segments impacted due to tariffs. Maintaining continuity with selective targeted improvements could be expected rather than any sweeping changes.

A focused push in this budget to fast-track PSU privatisation which will unlock value, improve efficiency, and increase competitiveness could be a game changer.

Do you agree that PSUs offer significant upside and are now more reasonably valued than the private sector?

It is not possible to generalise. Select PSU banks and energy PSUs look attractive. PSU banks have witnessed re-rating recently benefiting from reasonable credit growth, asset book improvements, and expected NIM stability. Credit revival could potentially drive further re-rating. Energy-linked PSUs are entering an execution-led phase with more predictable cash flows.

On the other hand, few defence sector PSUs look expensive having seen significant valuation gains driven by robust order books and rising optimism on spends.

Certain segments offer attractive valuations, making 2026 a year for selective alpha. Well-managed PSUs with strong earnings visibility could deliver significant upside.

Which themes do you expect to perform well this year despite uncertain global cues?

Sectors such as banks, metals, autos, and few capital goods are poised to benefit from sustained infrastructure push, uptick in credit growth, and consumption trends. Progress on resolving tariff challenges could further accelerate export-oriented industries by providing significant tailwinds.

Additionally, energy, and select IT services remain attractive driven by increasing global demand and technological shifts. A clear policy framework on privatization could unlock substantial value in select PSU stocks, enhancing their growth prospects.

In general, companies showing better earnings visibility and comfort in valuations will benefit.

Do you expect the US Federal Reserve to continue its monetary policy easing cycle?

Recent Fed’s dot plot points to a gradual, limited easing for 2026–27, a shift from rapid easing to a measured strategy. Inflation has moderated but remains above target. The labour market shows slower job growth and GDP is projected to grow moderately.

Fed is expected to take a cautious data-driven approach, with modest cuts during the year if inflation eases and labour conditions soften.

Do you think US tariffs are likely to persist for a longer period?

India remains cautiously optimistic, with officials noting that active negotiations are underway with the US to manage and potentially ease tariff pressures through pragmatic negotiated solutions. At the same time, the US Supreme Court’s decision is still awaited. Given how long this has been ongoing, no one can predict the outcome or its timeline. We will have to wait and watch how it unfolds.

Do you expect the equity market to deliver a significant breakout, or remain range-bound in current year, given that performance has been largely flat over the past 15 months?

If earnings recovery broadens, market breadth is likely to improve. Key drivers for market performance in 2026 include positive progress on tariffs, a strengthening earnings outlook, and stable geopolitical conditions. Ultimately, the sustainability of the earnings trajectory is crucial to justify valuations and fuel a breakout in market performance. While we remain optimistic about the 2026 trend, it’s essential to closely monitor developments on the earnings front.

Do you believe this tough period will lead to the emergence of many important companies from India?

Tough times often provide opportunities for new leaders to emerge, and we really hope that this period helps Indian companies to emerge, reinvent and adapt to market shifts and become global leaders.