Union Budget 2026 Coming Soon: What Investors Need to Track for Better Market Positioning as Markets, Tariffs and FPIs Drive Volatility

Union Budget 2026: Why Markets Are Watching Closely

Dalal Street is extremely anxious with just weeks remaining until the Union Budget. Finance Minister Nirmala Sitharaman’s speech on February 1 could determine the market’s mood, and the flow of money, for the coming year.

January has already tested investors’ patience. The Nifty 50 index has fallen 1.4% in just 10 trading days due to global trade disputes, fresh tariff threats from US President Donald Trump, and relentless selling by foreign portfolio investors.

Adding rising geopolitical risks and a more inward-looking global policy environment, Budget 2026 becomes not just a numbers exercise but a potential market trigger that investors cannot afford to miss

Union Budget 2026 In Between Global Headwinds: Tariffs, FPIs and Market Volatility

Global cues have now become a heavy resistance for Indian markets, and investors are feeling the drag. Newly imposed tariffs by US President Donald Trump- a 25% reciprocal tariff on India and additional levies linked to India’s oil imports from Russia- have already shaken market sentiment. Uncertainty has been further amplified by speculation that new legislation could allow the US government to impose even steeper tariffs, keeping markets on edge.

At the same time, persistent foreign portfolio investor (FPI) outflows continue to drain momentum from Indian equities. Global growth concerns, fluctuating bond yields, and shifting risk appetite have driven overseas investors to remain cautious toward emerging markets, including India. The outcome is familiar: choppy markets, thinner risk-taking, and heightened sensitivity to policy signals.

In such circumstances, domestic clarity becomes critical. A credible Budget, firm fiscal discipline, and a steady reform roadmap could serve as a much-needed anchor, helping restore investor confidence even as global storms refuse to abate.

Budget 2026: Key Policy Expectations

• Manufacturing & Infrastructure Push

  • Manufacturing likely to be a key focus to offset the impact of US tariffs

  • Continued emphasis on infrastructure spending to drive growth and job creation

• Fiscal Discipline & Revenue Augmentation

  • Budget expected to strike a balance between growth support and fiscal prudence

  • Pressure to boost revenues after last year’s tax cuts

  • Recent excise duty hike on tobacco signals possible further revenue measures

  • Higher disinvestment targets may be on the table

• Fiscal Deficit & Tax Policy Stability

  • Potential lowering of the FY27 fiscal deficit target after meeting FY26 goals

  • Could help rebuild foreign portfolio investor (FPI) confidence

  • Markets expect stability in tax policies, with no major changes to LTCG or STT

How Should Investors Position Their Portfolios Ahead of the Budget 2026?

• Avoid Budget-Driven Speculation

  • Don’t trade based on single Budget headlines

  • Expect short-term volatility, but focus on long-term policy execution

  • Stick to fundamentals over knee-jerk reactions

• Adopt a Core-and-Satellite Strategy

  • Build a strong core with large-cap stocks offering balance sheet strength

  • Prefer companies with stable earnings amid global and geopolitical risks

  • Add selective exposure to rate-sensitive sectors like real estate, autos, and NBFCs as RBI rate cuts play out

• Focus on Defensive & Quality Bets

  • Use pre-Budget volatility to accumulate IT and pharma stocks selectively

  • Maintain diversification across sectors and market caps

  • Avoid leverage and overconcentration; discipline matters most during event-driven phases

What Investors Should Know

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