Whalesbook
Budget 2026 Outlook
Pratik Gupta, CEO and Co-Head at Kotak Institutional Equities, forecasts the upcoming Union Budget 2026 will likely sidestep substantial fiscal stimulus measures. The government faces constrained fiscal space, prompting a shift towards what he terms "governance stimulus." This includes deregulation, optimization of duty structures, and targeted policies to bolster exports and attract capital inflows, with a specific watch on rupee-supportive actions.
Global Headwinds Dominate
Indian equities are currently navigating significant risks originating from the global economic environment. Gupta points to volatile global bond yields, geopolitical uncertainties, and persistent foreign institutional investor (FII) selling as major concerns. He highlighted Japan's sharp rise in bond yields as a recent warning signal. Approximately $3 billion in FII funds have already exited Indian markets in January, as India is perceived as lacking high-growth or low-valuation appeal, and does not feature dominant artificial intelligence-linked stocks that are attracting global capital.
IPO Pipeline Resilience
Despite prevailing market sentiment, the pipeline for initial public offerings (IPOs) and significant corporate deals remains robust. Gupta noted that while foreign participation in IPOs is subdued, domestic mutual funds and insurance companies are actively providing demand. Valuation expectations have moderated from previous months, leading to more stringent price negotiations by local investors. Most companies continue with their capital market plans, though prolonged market weakness could prompt delays.
Market Valuation Concerns
Looking ahead, global markets may experience continued volatility due to uncertainties surrounding U.S. trade policies. While India's economic fundamentals remain relatively stable, with controlled inflation and projected growth between 6.5-7%, Gupta advises investors to prioritize capital preservation. He indicated that large-cap stocks are approaching fair valuation levels post-correction. However, mid-cap and small-cap segments could face further downward pressure due to higher existing valuations and recent earnings downgrades.