Budget 2026 should push reforms in land, labour, and ease of doing business, says Nilesh Shah of Kotak AMC

The previous year’s moves on income tax relief for the salaried class and GST slab rationalisation were welcome – they boosted consumption and eased compliance.

To take it further and truly fire up corporate India, the government should focus on sustaining fiscal prudence while accelerating reforms.

Stick to the path of declining debt-to-GDP (we’ve already made good progress post-Covid, with households and India Inc. leading the deleveraging).

Beyond that, prioritise ease of doing business 2.0 – faster land acquisition, labour flexibility, and out-of-the-box ideas like monetising household gold/silver reserves to fund growth without straining the fiscal.

This can support the 8th Pay Commission without derailing consolidation.

Capex push in infrastructure must continue, but with better execution and private sector participation.

Focus on asset monetisation and strategic divestments to raise resources for investment in research and development.

We can’t fully decouple, but India’s structural story – fastest-growing major economy, demographic dividend, and improving macros – gives us resilience.

The key is to keep fiscal discipline (commitment to lower debt-GDP), control inflation, and let the rupee find its level without excessive intervention.

Foreign institutional investors (FIIs) have been underweight or selling, but as global AI hype moderates, India stands out. Policy continuity and a growth-orientated budget can accelerate their return. DIIs and retail have filled the gap admirably; let us hope that it continues.

Maintain fiscal prudence – no deviation from declining debt trajectory. Focus on consumption boosts via targeted relief but avoid populist giveaways.

Rationalise taxes on foreign portfolio investors (FPIs) who are exempt from tax payments in their jurisdiction from paying tax in India further to encourage long-term investing.

Out-of-the-box thinking on unlocking idle assets (gold/silver monetisation) could fund infra/CapEx without borrowing more.

Push reforms in land, labour, and ease of doing business to revive the private investment cycle. Overall, signal stability and growth – markets love predictability. Achieve the trinity of impossible with raising non-tax revenue, spending on infrastructure and maintaining fiscal prudence.

Media reports suggest possible concessions on long-term capital gains or exemptions for certain institutional investors on dividend taxes. If that materialises in the budget, it could be encouragement for FII inflows and shifting investor behaviour towards longer horizons.

Anything that reduces friction for long-term capital would be positive; short-term tinkering might create volatility, but broad-based relief would boost confidence.

The surge is real and structural – mutual funds, SIPs, and awareness have driven it. It’s sustainable as long as we educate on long-term investing and avoid get-rich-quick traps.

Over-enthusiasm in frothy small/mid-caps, chasing momentum without understanding valuations, and reacting to short-term noise are things investors should be wary of.

Stay disciplined: invest via SIPs, diversify, and remember markets reward patience like Test cricket – stay on the pitch, take singles, and hit boundaries on loose balls. Don’t expect 20%+ every year; high single-digit to low double-digit is realistic for the medium to long term.

Our markets are at a valuation where rerating looks difficult. Earnings growth, which is linked to nominal GDP growth, will drive the returns.

Broadly, expect earnings growth in select pockets rather than a uniform rally. Consumer discretionary (rural recovery + urban spending) and financials (margin bottoming, credit growth, and improving asset quality) look promising as policy initiatives from 2025 feed through.

Valuations have corrected in many areas after the 2025 reset. Avoid overpaying for growth; focus on efficient capital allocators with reasonable ROE.

Markets are slaves to earnings – efficient capital allocation matters more than just growth. Play the long innings: be patient, learn continuously, and India’s growth journey continues despite some speed breakers – stay invested wisely.