SYNOPSIS: Union Budget 2026-27 is expected to balance growth and fiscal discipline, with railways, defence, infrastructure, autos, chemicals and real estate in focus, as brokerages track execution, policy continuity and sector-specific reforms.
Union Budget 2026 will be presented on Sunday, 1st February, by Finance Minister Nirmala Sitharaman, marking her 9th budget and the 88th Union Budget since Independence. Last year’s budget leaned heavily towards reviving consumption, dialling back the pace of capex to support demand. This time, expectations remain high as usual, especially as policymakers balance growth priorities with fiscal discipline.
According to Motilal Oswal Financial Services (MOFSL), FY27 is likely to be a transition year for the Indian economy. Firms and households are expected to adjust to GST rationalisation, faster progress on deregulation, and simplified compliance frameworks across sectors, all against the backdrop of a challenging global environment.
As Budget 2026-27 approaches, the article sheds light on a few emerging sectors as top areas to watch, with multiple brokerages expecting targeted policy support. Below are some of the most closely tracked sectors, along with brokerage views and select stock picks that investors are keeping on their radar:
Railways Sector
Railways continues to be one of the most closely watched sectors ahead of every Union Budget, alongside defence. For Budget 2026-27, analysts at HDFC Securities believe the railways and defence sector warrants a positive bias, supported by strong execution and sustained government focus.
Meanwhile, analysts at PL Capital expect the railways sector to see steady and calibrated growth in Budget 2026-27. Industry estimates suggest a potential around 5 percent increase in capital outlay, which could take total railway allocations closer to Rs. 2.65 lakh crore. Incremental spending is likely to be channelled towards signalling systems and track upgrades, supporting the rollout of semi-high-speed corridors and enhancing overall network safety.
In FY26, Indian Railways has already utilised over 80 percent of its Rs. 2.52 lakh crore capital outlay by December, reflecting strong progress across rolling stock procurement, station redevelopment and safety-related infrastructure projects. With healthy visibility on ordering pipelines and execution timelines, railway-linked stocks are expected to stay firmly in focus.
Companies such as Rail Vikas Nigam Limited, IRCON International and Jupiter Wagons are likely to closely track Budget announcements, particularly around fresh allocations, tender flow and execution clarity in post-Budget.
Defence Sector
Unsurprisingly, the defence sector remains one of the most closely watched and widely discussed areas ahead of the Budget 2026-27. Analysts at PL Capital are broadly expecting an 8-10 percent growth in defence capital outlay in the Union Budget 2026-27 – a level viewed as reasonable given the government’s fiscal constraints and its growing focus on execution and indigenisation (Make in India), rather than aggressive expansion.
Ongoing geopolitical events continue to assist the case for sustained defence spending over the medium term. Defence stocks, which have delivered a strong multi-year rally, have seen valuations correct by roughly 15-20 percent from recent peaks. This correction reflects concerns around stretched execution schedules and delays in the conversion of large orders into revenue.
According to analysts at PL Capital, investor attention is likely to remain centred on decisions taken by the Defence Acquisition Council (DAC) and the pace at which contracts are awarded and closed, as these will be key drivers of earnings visibility beyond Budget Day.
Further, Jefferies continues to retain a ‘buy’ rating on Bharat Electronics Limited (BEL), citing investor comfort around the company’s consistent execution track record and strong medium-term earnings visibility. Meanwhile, analysts at HDFC Securities see opportunities across the broader defence space, with BEL and HAL remaining key focus stocks.
Additionally, analysts at Choice Broking believe defence players such as Cochin Shipyard, Mazagon Dock Shipbuilders, and Garden Reach Shipbuilders & Engineers (GRSE) are well placed to benefit from policy support under the Budget 2026 and the India-EU Free Trade Agreement, alongside niche engineering players like MTAR Technologies.
Infrastructure & Construction Sector
As per PL capital, infrastructure continues to remain the government’s primary growth engine, with public capex for FY26 budgeted at around Rs. 11.2 lakh crore, led by roads, railways and defence. Looking ahead, overall capex is expected to remain elevated at around Rs. 12.4 trillion, with a clear focus on roads, railways and urban development to support economic growth and employment generation.
Analysts at PL Capital expect the Budget 2026-27 to place greater emphasis on execution and timely project completion, rather than announcing a sharp increase in headline capex numbers.
From an investment perspective, MOFSL has highlighted several infra and capital goods companies as potential beneficiaries. Key names include Larsen & Toubro, ABB India, Siemens India, BHEL, Hitachi Energy India, and KEC International, all supported by strong order books and execution visibility.
Cement and building material players such as UltraTech Cement and JK Cement could also benefit from sustained infrastructure activity. Meanwhile, electrical and cable companies, including KEI Industries, Polycab India, and Crompton Greaves Consumer Electricals, remain in focus.
Automobiles Sector
The announcements of income-tax relief and GST rationalisation have already been made, improving affordability. Now, analysts expect the Budget 2026-27 to support a gradual recovery in auto demand, especially across mass-market and 2W segments. Rural consumption is likely to remain a key volume driver, while auto exporters could benefit from continued policy support for global value-chain localisation. Auto stocks like Maruti Suzuki India, TVS Motor Company, Eicher Motors, Bajaj Auto, and Hero MotoCorp continue to remain on investors’ radar.
At the same time, auto manufacturing companies are pushing for tax relief on strong hybrid vehicles, which currently attract a GST rate of around 40 percent. Companies like Maruti Suzuki India and Toyota Kirloskar Motor have been advocating for a lower tax rate to accelerate hybrid adoption and support the transition toward cleaner mobility.
Chemicals & Fertilisers Sector
In the chemicals and fertilisers space, Budget 2026-27 is expected to focus on long-pending structural reforms. Key areas under watch include uniform taxation, faster input tax credit refunds, and simplified licensing procedures. While food subsidies are likely to continue, analysts expect a gradual policy shift toward farm infrastructure development and productivity-linked spending.
As per PL Capital, stocks such as Fertilisers and Chemicals Travancore (FACT), Rashtriya Chemicals and Fertilisers (RCF), and Coromandel International are expected to closely track policy cues emerging from the Budget.
Real Estate Sector
The real estate sector has seen a moderation in housing sales over the past four quarters, with demand increasingly skewed toward premium and luxury segments. Analysts expect Budget 2026-27 to rebalance this trend by refocusing on affordable and mid-income housing, potentially through extensions to Pradhan Mantri Awas Yojana (PMAY) and selective tax or stamp duty rationalisation.
As per analysts of PL Capital, the premium-focused developers such as Prestige Group and Oberoi Realty may continue to benefit at the higher end, while companies like Godrej Properties and Puravankara remain key beneficiaries if policy support for affordable housing gains traction.
Overall, expectations from the Union Budget 2026-27 remain measured rather than any such excitement. While most brokerages anticipate continued policy support across key sectors, the emphasis appears firmly on execution, project completion and incremental reforms rather than aggressive headline announcements. Market outcomes are likely to hinge on how effectively budgetary allocations translate into on-ground progress, earnings visibility and sustained demand, particularly amid global uncertainties and domestic fiscal constraints.
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