Budget 2026 could stem FII’s selling pressure, says Sudip Bandyopadhyay

As foreign portfolio investors (FPIs) continue to exit Indian markets amid global uncertainties, Budget 2026 could play a crucial role in stabilizing stock sentiment, says market expert Sudip Bandyopadhyay. Strategic measures targeting FII issues should be the main focus for policymakers, he emphasized.“The only surprise announcement I am looking forward to is if they go ahead with abolishing the long-term capital gains tax. Investors, especially FPIs, will welcome this announcement and… to some extent this can be controlled if the long-term capital gains tax is removed from the market,” Bandyopadhyay said.

He added that a clear divestment strategy would further boost market confidence. “The government of India… has not really taken advantage of this opportunity… to at least… raise resources. This is an area where the market would like to see the government come up with a concrete goal and plan.”

While the Budget cannot single-handedly stem market volatility, targeted announcements can provide relief, Bandyopadhyay pointed out. “If there are certain announcements in the budget that the market likes… we will see a positive momentum coming back in the market. But… the outflow of FPIs has to stop… some measure… will encourage them to stay invested and make fresh investments,” Bandyopadhyay said.

Sectoral opportunities are likely to emerge, especially in banking, BFSI, defense and infrastructure. “These two segments, especially banking, BFSI, have positive momentum for several reasons…the defense sector as a whole will do very well in the near future. Some of the core infrastructure segments will do very well…”

Fiscal prudence remains a cornerstone for long-term investors. “People who are betting on the Indian economy are definitely looking very closely at fiscal prudence. Disinvestment is one of them, something that the government should very actively pursue to alleviate some of the resource constraints,” he noted.

With FII sentiment at a critical juncture, Budget 2026 can act as a catalyst, addressing key tax issues, encouraging foreign capital inflows and paving the way for a more stable stock market amid ongoing global headwinds.Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)