Greetings from Team Carnelian!!

Building for the Next Decade, Not the Next Quarter

In the Ramayana, the war isn’t won by the loudest battle cry—it is won by building a Setu. A bridge that looks slow while it’s being built but becomes decisive once it exists.

Union Budget 2026 feels similar. It is not designed to deliver a “one-day sugar high” for sentiment. It is designed to lay strong foundation—so India can scale manufacturing, deepen infrastructure, and stay fiscally credible.

What we like is continuity. The ‘Setu’ was not built on the Budget Day; but has been taking shape through the years via a steady run of trade and competitive reforms

• FTAs / trade partnerships: Over the past year, the government has doubled down on expanding trade partnerships—pushing key FTAs (including the India-UK, India -NZ) and concluding on the EU Trade deal- mother of all deals. The intent is clear: expand export market access to “make in India” and integrate Indian supply chains deeper into global trade flows.
• Tax relief: On the domestic front, it already gave two big reliefs—income-tax cuts in Budget 2025 under the new tax regime and GST rate cuts/rationalisation under GST 2.0.

So, by the time the Finance Minister stands up and talks “manufacturing-first”, it doesn’t feel like rhetoric. It feels like continuity.

This budget puts utmost emphasis on capex + manufacturing + service sector with a clear long-term orientation—designed to crowd-in private investment, deepen supply chains, and improve competitiveness, rather than deliver near-term stimulus. This Budget is not vague about “Make in India”, It is targeted to take India’s manufacturing to 25% of GDP vs 15% now.

Right up front, the finance minister places the first kartavya as accelerating and sustaining growth — with a clear emphasis on scaling up manufacturing in strategic and frontier sectors with equal emphasis on attaining leadership on services.

• Govt capex (FY27 BE): ₹2 lakh crore ~9% YoY increase (vs ₹11.2 lakh crore in FY26 RE), extending a decade-long step-up from ~₹2 lakh crore in FY15. 
• Biologics / biopharma manufacturing:₹10,000 crore “Biopharma Shakti” to strengthen biopharma manufacturing (biologics/vaccines/complex generics) and support export competitiveness.
• Electronics / manufacturing depth:₹40,000 crore outlay for electronics component manufacturing / related support and a continued semiconductor thrust.
• MSME / SME push:₹10,000 crore “SME Growth Fund” + credit/liquidity support measures to help MSMEs scale and formalize.
• Domestic container manufacturing:₹10,000 crore scheme aimed at building a globally competitive container manufacturing ecosystem (logistics resilience + import substitution).
• Railways / roads:Rail capex +~10% in FY27 (after flat FY26); Road capex +~8% in FY27 (after -~5% FY26).
• Defense:defense capex up ~17%; broader defense spend increase is also being reported in market coverage.
• Automobiles: PLI outlay for Auto and Components increased to INR59.4bn from INR20.91bn, an increase of 184%.
• Datacentre: tax holiday till 2047 for foreign companies providing global cloud services using Indian data centres.
• Infra & logistics: pushes logistics connectivity — including seven high-speed rail corridors.
• Significant shift from subsidies to productivity: the combined food + fertiliser + petroleum subsidy declines by ~4.5% to Rs 4.1 lakh crore (FY27 BE). That is exactly the trade-off we want to see: less consumption support via open-ended subsidies, more productivity support via capex + manufacturing ecosystems.

Our view: The above measures will aid in import substitution + exports growth and lays a strong ground for Viksit Bharat during Amritkaal period. The second order impact will be higher credit growth and job creation in the economy, leading to higher consumption growth

Growth with Fiscal deficit + debt discipline: the “anchor” to capital flows

The finance minister reiterates the debt glidepath: debt-to-GDP estimated at 55.6% (BE FY27) vs 56.1% (RE FY26), i.e., declining.

Fiscal deficit stays controlled: 4.4% (RE FY26) and 4.3% (BE FY27).

Our view: A credible, persistent downshift in debt dynamics should gradually lower the risk premium for India. Over time, that can bring down cost of capital and support higher quality capital inflows. Over the last decade, India-US yield gap has improved meaningfully from ~6% in 2015 to ~2% now, which supports a relatively lower cost of capital for India Inc.

Steady as She Goes: reading the Budget beyond just STT which got the maximum eyeballs:

Futures STT raised to 0.05% (+150%) and options to 0.15% (+50%), near-term negative for trading volumes/brokerage intensity, especially as retail volumes have already cooled. This one line summarizes the government’s choice: less encouragement for speculation, more support for capacity building.

The government has raised Person Resident Outside India (PROI) limits: overall investment limit from 10% to 24%, and individual limit from 5% to 10% under Portfolio Investment Scheme (PIS) — a constructive step when foreign appetite has been uneven.

Union Budget 2026 is not a Budget designed to manufacture a one-day market rally. It is designed to manufacture an economy. This is not a tax-cut Budget.  

It is about long-term growth through:

• manufacturing + supply chains (electronics, biopharma, critical minerals)
• infrastructure + logistics momentum (capex, rail corridors, connectivity)
• digital and AI-enabling pipes (data centers/cloud incentives)
• and, crucially, fiscal discipline (deficit + debt trajectory)

In short, the government clearly chose:
 Growth + stability vis-à-vis short-term giveaways

And if we go back to the Ramayana analogy: The Setu is what long-term thinking looks like: build first, progress later. The Setu is a reminder: preparation is often indistinguishable from progress—until the results arrive.

This Budget, too, will reward patience. We continue to hold our positive view as India stands to gain with manufacturing revolution, formalization of economy and a strengthening macro foundation—than chase what looks “exciting” for a day.

To conclude, we remain positive on equities from a medium to long-term perspective. Over the next year, market returns are likely to be driven more by earnings growth than by headline events. After a long grind and sharp correction in mid and small caps, we believe there is scope for a comeback as the cycle turns—much like what we saw post-2022.

From a global lens, one additional development bears watching. Recent reporting suggests the U.S. has indicated India can resume Venezuelan crude purchases under a U.S.-controlled framework, partly as a replacement for Russian oil. If this becomes part of a broader understanding between India and the U.S., it could improve the backdrop for trade negotiations and potentially reduce the tariff overhang that has weighed on sentiment.

As with every market cycle, true alpha will come from disciplined stock selection, owning the right companies in the right sectors and avoiding the laggards. As we step into this phase, we remain committed to our core principles: protecting capital, participating in opportunity, and compounding wealth through conviction in quality.