Budget 2026 Expectations: Defence, Infrastructure, To Consumption | 5 Sectors To Receive Maximum Allocation

Budget 2026 Expectations: Defence, infrastructure, consumption, and manufacturing are likely to see maximum allocation in the upcoming Union Budget 2026-27. Set to be presented by Union Finance Minister Nirmala Sitharaman, the Budget 2026, is likely to stay on track in terms of fiscal prudence and may focus on capex-led sectors, according to a survey by smallcase managers released on Thursday, January 22.

Defence is expected to emerge as one of the biggest beneficiaries of Budget 2026, backed by higher budgetary allocations and policy support. Meanwhile, the Indian stock market is likely to remain volatile as the Budget 2026 presentation date draws closer, with investors positioning ahead of key announcements.

The survey highlights how smallcase managers are restructuring their portfolios around long-term themes like defence, infrastructure, manufacturing etc while "staying mindful of near-term volatility," stated Vasanth Kamath, Founder & CEO, smallcase.

Budget 2026: Defence, Infrastructure, Manufacturing Among Top Beneficiaries

Defence

Just like every other year, defence is likely to see the maximum budget allocation. Nearly 40% of the respondents of the survey expects that the government will increase Budget 2026 allocation driven by indigenisation, modernisation, export potential and sustained government spending.

Infrastructure

Another sector which is likely to see strong budget allocation is infrastructure. Nearly 29% of the respondents in the survey voted that the sector will see higher allocation as the government will continue to focus in public capex and long-term growth multipliers.

Manufacturing

The sector accounted for around 18% responses in the survey. The sector may see higher allocations on expectations of continued PLI-led policy support.

Consumption And Agriculture

Nearly 7% of the respondents of the survey felt that consumption and agriculture sector may also see a strong allocation in the Budget 2026.

Stock Market Volatility During Budget 2026, Inflation Target

As the Indian economy saw a benign inflation throughout the year 2025, experts believe that the inflation is likely to stay in the range of 4-5% or below 5% in the financial year 2026-27.

The survey also indicated expectations of incrementation in terms of taxation. A majority of respondents see limited scope for large corporate tax cuts, while targeted relief or simplification for salaried individuals is viewed as more likely. The managers believe that corporate taxes are more likely to see stability rather than cuts, with continued focus on capex-linked incentives and compliance.

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