Dhiraj Relli, MD and CEO of HDFC Securities, shares insights on Budget 2026, suggesting it will be an incremental budget focusing on consumption rather than a gamechanger. He advises investors to focus on sector rotation, particularly consumer discretionary, banking, and financial services, anticipating FY27 to be a strong year for these sectors with improved earnings quality.
As Budget 2026 approaches, expectations are mixed about whether it will bring transformative changes to the Indian economy or maintain a steady course. Dhiraj Relli, Managing Director and CEO of HDFC Securities, shared his expert views on NDTV Profit, providing a detailed analysis of what to expect and how investors should strategize.
According to Dhiraj Relli, the budgets over the past ten years have been quite relevant and responsive to the needs of the industry. When capital expenditure (capex) was a priority, the government focused heavily on it, driving significant investments in infrastructure and industrial growth.
However, in the last year or so, there has been a noticeable shift in focus towards consumption. Recognizing that consumption is a key driver of economic growth, the government has implemented measures both within and outside the budget to stimulate consumer spending. This included major reforms on the taxation front last year aimed at boosting consumption.
Relli believes that Budget 2026 will not be a blockbuster or gamechanging budget but rather an incremental one. He suggests that while there may not be any fireworks, the budget will reflect a deep understanding of the economy and industry requirements. The nuances and fine print of the budget will reveal targeted measures that align with current economic realities.
When asked about how investors should plan their portfolios in light of these expectations, Relli emphasized the importance of sector rotation. He advises investors to focus on sectors with better earnings prospects rather than chasing capex-heavy or industrial sectors.
Consumer Discretionary and Consumer Space: These sectors are expected to benefit from the government's focus on boosting consumption. Investors should consider increasing exposure here.
Banking and Financial Services (BFSI): Despite underperformance in the past year, both private and public sector banks are poised for a turnaround. Relli predicts FY27 will be a gamechanging year for BFSI, including capital markets.
Capital Markets: Activity has been lackluster over the last 18 months, but improvements are anticipated in FY27, supported indirectly by budget initiatives.
Relli is optimistic about FY27, expecting significantly better earnings quality across key sectors. While the budget itself may not be revolutionary, the cumulative effect of government initiatives and economic trends should create a favorable environment for growth and investment returns.
Budget 2026 is likely to maintain a steady trajectory with incremental improvements rather than sweeping reforms. Investors should focus on sectors aligned with consumption growth and financial services, anticipating a stronger economic performance in FY27. The budget's fine print will be crucial in understanding the government's approach to sustaining economic momentum.
This analysis by Dhiraj Relli provides valuable guidance for investors and industry watchers as they navigate the post-budget landscape and plan for the coming fiscal year.
