Budget 2026: Capex continuity, fiscal discipline key for market; Sensex seen near 90,000 by December-end, expert says

As the government prepares Budget 2026, Ravi Singh, Chief Research Officer at Mastertrust, expects continuity in policy direction, with capital expenditure, fiscal discipline and taxation stability emerging as key drivers for market sentiment.

On defence, the market expert said, "Expect defence to continue getting strong and steady support, though not an eye-catching jump in numbers. The government's focus has clearly shifted from just spending more to spending smarter -- especially on indigenous manufacturing, technology, and long-term capability building. Budget 2026 is likely to reinforce that direction."

He added, "Most of the increase, if any, should come in capital expenditure, supporting equipment purchases, modernisation and domestic defence companies. Areas like drones, electronics, shipbuilding and R&D could see priority. Revenue spending is likely to remain controlled, keeping overall fiscal balance in mind."

According to Singh, defence stocks will react more to execution and order visibility than to headline Budget numbers.

On overall capital expenditure, Singh expects the government to maintain its investment push. "I expect Budget 2026 to announce capex targets in the range of Rs 11.5–12.5 lakh crore, broadly continuing the multi-year capex push."

He also said, "From an investor sentiment point of view, the direction matters more than the absolute number. If capex grows in high single digits and allocations are clearly channelled toward infrastructure, railways, defence, power and urban development sentiment should stay positive."

Singh identified three Budget factors that could prove critical for the market. "First, fiscal discipline. Market will closely watch the fiscal deficit path. If the numbers suggest control and credibility, confidence improves. Any sign of slippage can hurt sentiment quickly. Second, equity taxation stability. Even without tax cuts, market want assurance that there will be no adverse surprises on capital gains or STT. Third, capex quality and allocation."

On sectors that may remain under the radar ahead of the Budget, Singh said, "One sector flying under the radar is power transmission and distribution. With rising power demand, renewables integration and EV adoption, this area needs sustained investment and could benefit quietly from Budget support. Another is urban infrastructure and water management. These don't grab headlines like highways, but they are increasingly important for livability and state-level execution. Defence ancillaries and MSMEs are also underappreciated. Big defence names get attention, but smaller suppliers linked to electronics, precision engineering and components may benefit more consistently as localisation deepens. Lastly, logistics and warehousing could see indirect benefits if manufacturing and exports are supported. These sectors don't react immediately on Budget day but tend to outperform as execution unfolds."

Looking ahead to market levels, Singh expects the indices to trend higher by the end of the year, provided there are no major global shocks and the Budget remains supportive.

"Assuming no major global shock and a supportive Budget, we see Nifty in the 27,200-27,800 range and Sensex around 90,000 by December-end."

He also highlighted stocks that could benefit from Budget-linked themes. "L&T – Gains from higher infrastructure and defence capex with strong execution capability.
BEL – Benefits from defence capital allocation and indigenisation push. REC/PFC – Likely to gain if power, renewables, and transmission spending accelerate."