VK Vijayakumar, Chief Investment Strategist of Geojit Investments, hailed the budget for its focus on long-term growth. “The Finance Minister (FM) has delivered what the economy needs, at this juncture,” he said in an interview with Mint. While the Indian stock market suffered a sharp loss due to the STT hike, Vijayakumar noted that it is not a revenue-raising measure, but a decision to discourage retail traders. He suggests investors continue buying, focusing on fairly valued growth stocks in the mid and small-cap segments.
Edited excerpts:
What is your assessment of the Budget 2026?
I would rate this Budget high, giving seven marks out of ten. The FM has delivered what the economy needs at this juncture.
The Indian economy is doing well despite many headwinds like the Trump tariffs. The 7.4% GDP growth rate for FY26 makes India the fastest-growing large economy in the world, for the fourth year in a row.
The challenge is to sustain this growth rate even in the midst of geopolitical tensions in a fractured global order. For FY27, the 7% growth rate target can be achieved.
It is important that this growth is achieved through fiscal prudence. So, what the economy wanted was a growth-oriented Budget with fiscal prudence, and this is exactly what the FM has delivered.
With 7% GDP growth and around 3.5% inflation, nominal GDP growth of around 10% is achievable, and this would be a significant improvement over the 8.1% nominal GDP growth in FY26.
More importantly, from the market perspective, this is good news because 10% nominal GDP growth has the potential to deliver 15% earnings growth in FY27, triggering a modest rally in the market, after the initial negative reaction, which is unlikely to last beyond a couple of days.
How do you see the revised fiscal deficit target? What does it mean for the economy?
The government has stuck to the fiscal consolidation glide path by achieving the fiscal deficit target of 4.4% of the GDP for FY26 and targeting a 4.3 % fiscal deficit for FY27.
The debt-to-GDP ratio is targeted at 55.6% for FY27. There is no compromise on fiscal discipline. Growth orientation with fiscal discipline is the hallmark of this Budget.
What sectors can benefit most from the Budget?
A Budget proposal that spooked the market was the decision to raise the STT on F&O.
It is important to understand that this is not a revenue-raising measure, but a decision to discourage retail traders, 92% of whom were losing money in F&O trades, from trading in the F&O market.
This is a welcome move, though sentimentally negative in the short run. On the other hand, the decision to treat share buybacks as capital gains, treat all shareholders alike, and impose an additional tax on promoters for buybacks is a welcome move from the perspective of retail investors. This will discourage promoters from improperly using buybacks.
What should be our investment strategy after the Budget?
The sectoral allocations for defence and infrastructure are on expected lines, given the revenue constraints. The capital expenditure for FY27 is targeted at ₹12.2 lakh crore.
Defence allocation has been raised to ₹5.94 lakh crores. The high public capex will continue to assist growth. Investors can remain invested and continue systematic investment.
A major development, besides the Budget, is the crash in gold and silver prices.
The speculative boom in the precious metals has been busted, at least for the near-term, and this has the potential to bring investors back into the equity markets.
After the initial disappointment relating to unrealistic expectations of tax reliefs dies down, the market will start responding to fundamentals.
If FII selling drags the market further down in the near-term, the domestic consumption-driven large-caps will become attractive buys from a fundamental perspective.
DIIs will turn buyers in these segments, imparting resilience to the market. There are pockets of overvaluation in mid and small caps, and, therefore, investors should be choosy in these broader market segments, opting for fairly valued growth stocks.
First published in Mint
