Defence tops Budget 2026 beneficiary list, says smallcase survey; Nifty target & more

Union Budget 2026 is likely to maintain fiscal prudence, reflecting confidence in India’s medium-term equity outlook, the annual pre-Budget survey of smallcase managers suggested. The survey of more than 50 investment managers on smallcase platform showed a clear preference for capex-led sectors, alongside expectations of short-term market volatility. 

A strong majority of respondents remained positive on Indian equities over the medium term. More than 82 per cent of smallcase managers expected the Nifty 50 to close FY27 above 25,000. Of these, 43 per cent projected the index in the 25,000-27,500 range, while nearly 39 per cent expected it to be between 27,500 and 30,000.

Inflation expectations are well anchored, with over 85 per cent of respondents projecting FY27 inflation in the 4-5 per cent range or below 4 per cent.

Sectoral expectations

Most smallcase managers expected the Budget to continue focusing on strategic and capital-intensive sectors.

Defence emerged as the top expected beneficiary, with close to 40 per cent of respondents anticipating higher allocations, driven by indigenisation under Atmanirbhar Bharat, modernisation, export potential and sustained government spending. Infrastructure followed at around 29 per cent, reflecting confidence in continued public capex and long-term growth multipliers. Manufacturing accounted for about 18 per cent, supported by expectations of ongoing PLI-led policy support. Consumption and agriculture were cited by roughly 7 per cent each, suggesting expectations of targeted support.

Budget-related market volatility

Volatility around the Budget remained a key expectation. Nearly 80 per cent of smallcase managers anticipated some near-term market volatility, largely due to event-driven positioning, policy surprises and global factors. However, most respondents expected this volatility to be short-lived, with markets returning to fundamentals such as earnings growth and liquidity conditions after the Budget.

Views on taxation, consumption

On taxation, the survey pointed to expectations of incremental rather than broad-based relief. Most respondents saw limited room for large corporate tax cuts, while targeted relief or simplification for salaried individuals was considered more likely. Managers expected corporate tax rates to remain stable, with continued emphasis on capex-linked incentives and compliance.

On consumption, smallcase managers expected selective measures to support urban and rural demand, rather than wide-ranging fiscal stimulus, in line with fiscal discipline.

Commenting on the survey, Vasanth Kamath, founder and chief executive officer of smallcase, said, “smallcase’s annual pre-Budget survey from model portfolio managers offers a consolidated view of how they are interpreting government priorities, its implications for Indian markets and their portfolios. This year’s survey results highlight how they are positioning portfolios around long-term themes like defence, infrastructure and manufacturing, while staying mindful of near-term volatility.”

He added, “As managers anticipate volatility around the Budget but remain confident about the medium-term trajectory, smallcases continue to offer a structured way for investors to participate in these themes with clarity and discipline.”