‘For those in for the long haul, this is a God-given opportunity.’
‘Your market is falling despite strong fundamentals, and such a clear roadmap has been announced.’

Illustration: Dominic Xavier/Rediff

As Finance Minister Nirmala Sitharaman presented India’s Union Budget 2026-2027 on a historic Sunday, marking her ninth consecutive fiscal address, the government’s fiscal discipline stood out amid ambitious infrastructure plans worth Rs 12.2 lakh crore.

The Budget emphasised manufacturing prowess through the India Semiconductor Mission 2.0 with Rs 40,000 crore allocation, while proposing seven high-speed rail corridors and rare earth corridors to reduce import dependence.

 

However, markets reacted sharply to the steep hike in Securities Transaction Tax on futures and options trading, with the Sensex plunging nearly 3,000 points intraday (the Sensex’s high and low wildly swung between 82,727 and 79,900 respectively) before recovering half the losses to close the day at 80,723 points, down by 1,547 points or 1.88%.

Against this backdrop, Deven Choksey, Managing Director, KR Choksey Shares and Securities, shares his perspective with Prasanna D Zore/Rediff on the Budget’s emphasis on fiscal prudence, infrastructure spending, and what the STT increase truly means for investors beyond the knee-jerk market reaction.

‘To the world, we’re communicating that…’

Could you outline the major positives and negatives from this Budget, and how do you reckon this will play out until the next Budget?

This Budget is fundamentally about fiscal discipline and working back to basics of producing growth.

The government deserves full marks for sticking to fundamentals while maintaining a delicate balancing act of fiscal discipline. They have demonstrated maturity in their approach.

How will this fiscal discipline benefit the economy going forward?

Look at the various proposals, including sectoral allocations. They promise that 10% GDP growth is achievable when government spends in a disciplined manner.

The gross borrowing stands at Rs 17.1 lakh crore, while net borrowing is Rs 11.1 lakh crore. This aligns with estimations.

On one side, revenue estimation is increasing by Rs 2 lakh crore, while expenditure increases by Rs 4 lakh crore. But here’s what’s important: Out of this, about Rs 80,000 crore worth of income is being generated from divestment.

For this divestment to happen, they’ve actually included three public sector enterprise land portfolios to be recycled into REITs (Real Estate Investment Trusts). That will possibly give them the head-start for divestment and probably take care of their requirement for funds needed for deployment in infrastructure.

They have increased the outlay by close to 9% plus, and that’s where they are suggesting the growth engine will continue producing results.

Do you believe the government’s fiscal discipline will translate into lower interest rates ahead, which could also act as a multiplier?

That’s a significant positive. To the world, we are communicating that our debt-to-GDP ratio stands at 56%, which the country wants to bring down to 50% within five to six years.

At the same time, we are not over-borrowing, so our interest costs are going to come under control.

Inflation will follow suit.

Thereafter, the overall growth in the economy would be disciplined growth — sustainable and measured.

Do you see any negatives in this Budget?

In any budget, there’s always the intent of government to spend. They have been extremely conservative in estimating income and extremely aggressive in reflecting expenditure. That’s where I’d call this a mature Budget.

When you go conservative in estimating income and aggressive in estimating expenditure, it means you know exactly how finances are going to be played out. That’s fiscal maturity.

‘The market is down by Rs 9.40 lakh crore, but…’

How do you interpret today’s market fall? Has the market given thumbs down to the Budget?

STT has always been a concern for the market, and traders invariably want all concessions on the STT front.

In my view, even if the government implements this increased rate of STT, it will end up resulting in higher STT collection of Rs 15,000 crore to Rs 17,000 crore annually.

Against which, the market is down by Rs 9.40 lakh crore today (February 1). There’s no rational basis to this reaction, frankly.

In the past five instances where STT has been increased, the market has reacted negatively every time, and thereafter (trading) volumes (which the markets fears could fall dramatically due to higher STT) have increased.

The fear that FIIs will sell out more in the market exists. Yes, they may sell more if they see the currency depreciating. Otherwise, there’s no reason for them to exit, because the fundamentals of companies and the economy remain absolutely strong and convincing.

So you think today’s was a knee-jerk reaction?

The market has a business to react, so it reacted. Positions were built up before the Budget, and those positions had to be unwound, which happened today. That’s the mechanics of the market.

What is the market ignoring that you’d like to highlight?

It shouldn’t ignore the 22-year tax exemption given to data centres, along with a plan for exit if they want to leave before 22 years by implementing a 15% exit tax.

Which country in the world would give this kind of clarity for 22 years in a business where foreign investors may bring money, build capital here, and ultimately take their money out of the country with a predetermined tax rate?

The market has failed to understand the sheer impact of this. Data centres, cloud computing, along with the entire ecosystem it will bring, are going to be game changers for India.

Given these facts, do you think these particular proposals could emerge as a huge magnet for foreign direct investment?

Foreign direct investment is certainly going to come because there are a variety of areas where infrastructure continues to attract significantly large investment. There are 22 new waterways, about seven new corridors, seven new freight corridors coming up.

The larger emphasis is on bringing down logistic costs, and that’s what this Budget is narrating. If you ignore this, nothing will help. The market will someday recognise that there are genuine merits in this Budget. The STT concern will be forgotten after 48 hours.

But the fact is that implementation of these initiatives produces results. That’s what has been seen over the last 10 to 11 years.

‘This is a buying opportunity, not a regret opportunity’

Which themes could broadly emerge as winners due to the Budget?

I don’t think we can pinpoint just one. The entire manufacturing sector has been given significant thrust. If there’s one silver lining you want to see in this Budget, it’s that the entire manufacturing sector is getting substantial support, along with logistics and the new generation of industries.

What about defence and railways, considering you mentioned freight corridors?

Both have seen increased allocation compared to last year — as much as they can absorb. They’ve received appropriate allocations to support their growth trajectories.

The PSU Banks’ index crashed today by 5.7%. Are markets particularly disappointed with PSU bank divestment announcements?

It’s not PSU bank divestment, frankly. The market has a concern that if the government is going to borrow Rs 17.2 lakh crore gross and Rs 11.1 lakh crore net, then in such a situation, bond yields might spike.

If bond yields spike, then probably mark-to-market provisions in banks’ books will increase. That’s why the market sold off. But the assumption that bond yields will rise is a very knee-jerk reaction. I don’t think it’s clearly understood by the market.

Bond yields are not going to rise superlatively because the government’s borrowing programme is staggered. Generally, by the end of the full financial year, their borrowing is normally 60% to 70%, not 100% (of budgeted estimates). So even if they’ve stated Rs 17 lakh crore, the borrowing may end up remaining at 70%, not beyond that.

What’s your advice for retail investors who are in the market for the long term?

For those in for the long haul, this is a God-given opportunity. Your market is falling despite strong fundamentals, and such a clear roadmap has been announced. This is a buying opportunity, not a regret opportunity. It’s a buy opportunity — don’t regret it at all.

But there’s the shadow of geopolitics hanging over markets, along with tariff concerns…

In which part of the world is this uncertainty not present? Why are we asking for a perfect picture when it’s not available anywhere? Uncertainty is a global phenomenon right now.

India’s fundamentals remain robust despite these external headwinds.