As Finance Minister Nirmala Sitharaman is set to present the Union Budget 2026 on Sunday, February 1, market observers are keenly watching policy cues that could influence sectoral trends in the year ahead. This will be the ninth Budget in a row for Sitharaman and the 88th since Independence.
As per Bajaj Broking, the overall approach of the government seems to be to support structural growth and revive domestic demand, while keeping fiscal prudence intact. The recent policy measures of GST reform and income tax support seem to reflect a balancing act between the need to develop infrastructure in the long run and the need to support the economy in the short run against global challenges like geopolitical tensions and tariff-related issues.
As per a Choice Institutional Equities' analysis, the following five sectors are likely to continue to attract attention in the Union Budget 2026.
Defence: Push for indigenisation and long-term visibility
The defence budget is expected to see a sharp increase of around 20% year on year, which is a reaction to the constant geopolitical tensions, the need to modernise the forces, and the continued focus on indigenisation. Budgeting is expected to be capital-intensive, which is a clear move away from imports and towards making long-cycle defence platforms in the country. Key programmes such as Tejas Mk-2, QRSAM, and MRSAM are close to final platform choices and may see approvals to move ahead, which will provide several years of budget visibility.
Stock picks: Bharat Electronics, Bharat Dynamics, Data Patterns
Railways: Steady allocations, focus on efficiency
The Railways Budget is expected to remain a Budget focus, although the pace of growth may decelerate from the past few years. The Budget would continue to focus on enhancing the rail track networks, electrification, signalling modernisation, station redevelopment, and freight efficiency improvements.
Stock picks: RVNL, IRCON International, Jupiter Wagons
Infrastructure and real estate: Capex-led growth intact
Infrastructure and real estate are expected to remain at the heart of growth and employment generation. The Budget is expected to see high capital outlays by the government to support urbanisation and large projects.
Stock picks: Sobha, Smartworks Coworking Spaces
IT and digital economy: Focus on capacity and consumption
The Budget is expected to focus on developing indigenous capabilities through tax support, fast-tracking approvals, simplified power tariffs, and facilitating access to land. The Budget should continue to support investments in digital infrastructure, AI, and cloud computing.
Stock picks: Tata Consultancy Services, Meesho
Auto: Incentives for EVs and local ecosystems
The auto industry may turn out to be an important growth catalyst, with possible steps aimed at EV production, export, and enhancing the local component supply chain.
Stock recommendations: Mahindra & Mahindra, TVS Motor, Lumax Auto
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