The 2026 budget signals a revival in demand and a boost in private investment, says Motilal Oswal. BDL, UPL among the 5 stocks to buy

As preparations for the Union Budget 2026-2027 gather pace, the ongoing work signals a clear policy intent to accelerate domestic demand, revive private investment and generate employment, a budget note from Motilal Oswal Financial Services (MOFSL) said. The brokerage has identified five stocks in the auto, agriculture, defense, financial services and infrastructure themes that it believes could deliver strong gains for investors.“The budget is expected to focus on simplification of income tax, VAT and customs to facilitate ease of doing business and support fiscal consolidation, besides targeted support for agriculture, MSMEs, manufacturing, infrastructure, higher defense investments, EVs and renewables through credits and incentives,” said the note written by research analysts Sneha Poddar and Rekha Jaat.

Strong capital expenditure is expected on highways, logistics, defence, rail freight corridors and connectivity, complemented by a focus on skills, rural prosperity, women empowerment, AI adoption, climate action and digital finance to anchor India’s next phase of economic expansion, the note said.The Ministry of Finance has started work on the Union Budget for 2026-2027 from October 9, according to a circular issued by the Department of Economic Affairs (DEA).

The preparations are taking place against the backdrop of an additional 50% US tariff on most Indian goods and other external headwinds. These have heightened risks to India’s growth and employment prospects, prompting calls for stronger support for the export sector.

5 stocks to buy:

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% weightage.1) TVS engines: TVS Motors continues to outperform its 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 improving rural sentiment, strong entry-level recovery and sustained demand for two-wheelers will be the key triggers. Moreover, the company’s increase in market share, easing of discounts and expansion of margins will ensure strong earnings visibility. The Apache and Ntorq maker remains the top choice among OEMs.

2) UPL: The diversified agrochemical leader is well positioned to benefit from the union budget boost that is impacting rural prosperity through higher farm credits, MSME support and value chain strengthening, boosting farmers’ incomes and demand for crop protection.

The company’s strengths include stronger volumes, export tailwinds, improved working capital discipline and balance sheet strength post bond redemption, the brokerage note said. The company’s increasing focus on specialty chemicals supports solid growth in the second half of 2026.

3) Bharat Dynamics: Bharat Dynamics (BDL), a defense company, has a robust order pipeline of Rs 50,000 crore over five years, with a target valuation of Rs 20,000 crore in 2-3 years. This is in line with the expected increase in defense investments and infrastructure pressure.

The recent DAC approvals worth Rs 2.5 lakh crore for missiles, undersea warfare and naval weapons leverage BDL’s tactical/strategic expertise, pushing FY31 revenue through indigenization and lower provisioning to Rs 100 billion, the note said.

4) M&M financial services: M&M Financial is poised for the benefits of the Union Budget 2026-27 through rural prosperity, MSME credits and employment focus, driving PV/tractor loan growth amid rising volumes due to festive demand, VAT cuts and restocking.

The company targets Rs 3 lakh crore in assets under management (AUM) by 2030, representing a CAGR of 18-20%, supported by AI adoption, lower credit costs, controlled operational costs and margin stability for strong visibility of profits across retail portfolios.

5) Dalmia Bharat: The cement company is benefiting from the increase in investments in infrastructure, PMAY agricultural projects and urban projects, driving cement volume growth.

Dalmia Bharat is a low-cost cement producer with high mixing ratios, green energy and low freight costs. The company is targeting capacity of 62 million tonnes per year by fiscal 2028, and its cost optimization efforts are likely to boost EBITDA margins amid industry consolidation.

(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times.)