Budget 2026 could halt FII selling pressure, says Sudip Bandyopadhyay

Synopsis

Market expert Sudip Bandyopadhyay suggests Budget 2026 can stabilize equity sentiment by addressing FPI concerns, particularly through the removal of long-term capital gains tax. A clear divestment strategy and targeted sectoral support in banking, BFSI, defence, and infrastructure are also highlighted as crucial for boosting market confidence and encouraging foreign investment amid global uncertainties.

As foreign portfolio investors (FPIs) continue to exit Indian markets amid global uncertainties, Budget 2026 could play a pivotal role in stabilising equity sentiment, says market expert Sudip Bandyopadhyay. Strategic measures targeting FII concerns should be the key focus for policymakers, he emphasised.

“The only surprise announcement which I will be looking forward to is if they go ahead and remove the long-term capital gains tax. Investors, particularly FPIs, will be cheering that announcement and…to an extent can be contained 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…have not really used this opportunity…to at least…raise resources. This is one area which the market will love to see the government come up with a concrete target and a plan.”

While the Budget cannot single-handedly halt market volatility, targeted announcements could offer relief, Bandyopadhyay highlighted. “If there are certain announcements in the budget which the market likes…we will see a positive momentum coming back in the market. But…FPI outflows need to stop…some measure…will encourage them to remain invested and bring fresh investments,” Bandyopadhyay said.

Sectoral opportunities are likely to emerge, particularly in banking, BFSI, defence, and infrastructure. “These two segments, particularly banking, BFSI, there is a positive momentum for multiple reasons… the defence sector as a whole to do very well over the foreseeable future. Some of the core infrastructure segments will do very well…”

Fiscal prudence remains a cornerstone for long-term investors. “People who are taking a bet on Indian economy definitely look at fiscal prudence very-very closely…Divestment being one of them, which the government should very-very actively pursue to kind of remove the resource constraints,” he noted.

With FII sentiment at a critical juncture, Budget 2026 could act as a catalyst, addressing key tax concerns, encouraging foreign capital inflows, and paving the way for a more stable equity market amid ongoing global headwinds.

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

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