As preparations for the Union Budget 2026–27 gather pace, the groundwork underway signals a clear policy intent to accelerate domestic demand, revive private investment and generate employment, according to a budget note by Motilal Oswal Financial Services (MOFSL). The brokerage has identified five stocks across auto, agriculture, defence, financials and infrastructure themes, which it believes could deliver strong gains for investors.
"The Budget is expected to focus on income-tax, GST, and customs simplification to enhance ease of doing business and support fiscal consolidation, alongside targeted support for agriculture, MSMEs, manufacturing, infrastructure, higher defence capex, EVs, and renewables through credit and incentives," the note authored by Research Analysts Sneha Poddar and Rekha Jaat said.
A strong capital expenditure thrust across highways, logistics, defence, rail freight corridors and connectivity is anticipated, complemented by emphasis on skilling, rural prosperity, women empowerment, AI adoption, climate action and digital finance to anchor India’s next phase of economic expansion, the note added.
The finance ministry started work on the Union Budget for 2026-27 from October 9 as per a circular issued by the Department of Economic Affairs (DEA).
The preparations come against the backdrop of an additional 50% US tariff on most Indian goods and other external headwinds. These have raised risks to India's growth and jobs outlook, prompting calls for stronger support to the export sector.
The stocks recommended by MOFSL are TVS Motor Company, UPL, Bharat Dynamics (BDL), M&M Financial Services and Dalmia Bharat, and each of these stocks has been assigned a 20% weight.
1) TVS Motors: TVS Motors continues to outperform peers and is well-positioned to benefit from the budget’s push to boost domestic consumption and rural demand through higher allocations, income support, and infrastructure spending.
MOFSL said that improving rural sentiment, strong entry-level recovery and sustained two-wheeler demand will be key triggers. Moreover, the company's market share gains, easing discounts, and margin expansion will provide strong earnings visibility. The Apache and Ntorq maker remains its top pick in OEMs.
2) UPL: The diversified agrochemical leader is well positioned to benefit from the union budget push riding on rural prosperity via higher agri credit, MSME support, and value-chain strengthening, lifting farmer incomes and crop-protection demand.
The company's strong points are stronger volumes, export tailwinds, improved working-capital discipline and post-bond-repayment balance-sheet strength, the brokerage note said. The company's rising focus on speciality chemicals supports solid 2HFY26 growth.
3) Bharat Dynamics: Bharat Dynamics (BDL), a defence play, has a robust Rs 50,000 crore order pipeline over five years, with Rs 20,000 crore targeted in 2-3 years. This aligns with the expected defence capex surge and infra push.
The recent Rs 2.5 lakh crore DAC approvals for missiles, undersea warfare, and naval arms leverage BDL's tactical/strategic expertise, propelling FY31 turnover to Rs 100bn via indigenisation and lower provisions, the note said.
4) M&M Financial Services: M&M Financial is poised for Union Budget 2026-27 benefits via rural prosperity, MSME credit, and employment focus, driving PV/tractor loan growth amid surging volumes from festive demand, GST cuts, and restocking.
The company targets Rs 3 lakh crore in assets under management (AUM) by 2030, which is at an 18-20% CAGR, bolstered by AI underwriting, lower credit costs, controlled opex, and margin stability for strong earnings visibility in retail portfolios.
5) Dalmia Bharat: The cement company benefits from the budget’s infra capex surge, PMAY rural housing, and urban projects, driving cement volume growth.
Dalmia Bharat is a low-cost cement producer with high blending ratios, green power and low freight. The company is targeting 62 mtpa capacity by FY28, and its cost optimisation endeavours will likely lift EBITDA margins amid sector consolidation.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)