Mumbai : The Union Budget 2026 underscores fiscal discipline and sustained infrastructure investment but falls short on tax relief and foreign portfolio investor (FPI) incentives that markets were expecting, said Subho Moulik, Founder and CEO of Appreciate.
Reacting to the Budget announcement, Moulik said the absence of meaningful capital market incentives sends a clear signal to long-term investors that while India’s structural growth story remains intact, global diversification has become increasingly compelling.
“The macro framework remains stable, with a 4.3% fiscal deficit target and government capital expenditure scaled up to ₹12.2 lakh crore, including ₹40,000 crore allocated to semiconductors and electronics manufacturing. These investments build durable productive capacity in sectors such as semiconductors, defence, and infrastructure, rather than short-term consumption-led growth,” he said.
However, Moulik noted that the immediate negative reaction in Indian equity markets has largely been driven by the increase in Securities Transaction Tax (STT) on futures and options. Higher transaction costs are expected to compress derivative volumes and force institutional investors to recalibrate their hedging strategies.
“What the Budget did not announce is equally important. The lack of long-term capital gains tax relief means the relative tax burden on Indian equities versus global markets remains unchanged. With FPI outflows of ₹1.6 lakh crore in 2025, institutional capital is unlikely to reverse course without more decisive measures,” he added.
Moulik further pointed to currency trends, noting that the rupee depreciated 6.5% against the US dollar between April 2025 and January 2026, with no direct currency stabilisation measures or FPI incentives announced to counter capital outflows.
“For Indian investors, the case for overseas diversification strengthens further. A 70:30 India–US portfolio provides access to global AI leaders, semiconductor majors, and innovation-led sectors such as biotechnology, robotics, and quantum computing—areas where Indian markets offer limited exposure at global scale. Currency diversification also helps protect purchasing power across economic cycles,” he said.
According to Moulik, Budget 2026 reinforces confidence in India’s long-term structural growth, but does not alter the fundamental rationale for global portfolio diversification.