Portfolio Construction Strategy Post Budget 2026 Announcements

The budget 2026 once again prioritised capital spending and focused on emerging themes such as nuclear energy and data centers, while also boosting tourism, medical tourism, ship repairs, and new ports and logistics hubs.

Electronic manufacturing, in line with India's ambition to strengthen exports and boost employment, was also in focus. For portfolio construction, which themes are likely to gain prominence post-Budget 2026?

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Defence

Capital expenditure on defence increased by 17.6% from ₹1,86,454 crore in 2025 to ₹2,19,306 crore in 2026. This aligns with rising defence budget spending globally amid heightened geopolitical insecurity. The spending will benefit companies across the defence value chain, increasing their order book and revenue visibility.

In fact, the union budget also allocated ₹5,000 crore for private-sector research and development, which could benefit companies in the electronics and advanced defence systems sectors.

Also, aviation players are expected to benefit from a basic customs duty exemption on components used in the manufacture of aircraft and in Maintenance, Repair, and Overhaul operations by defence companies.

Infrastructure

The budget continues to prioritise infrastructure spending as it stimulates economic activity. Railways' budget increased by 10.3% to ₹2,77,830 crore, while road transport and highway budget increased to ₹2,94,167 crore, up 8.1%. 

The drinking water and sanitation segment saw a significant boost, with a 225% increase in capital outlay to ₹74,895 crore. Overall, this could benefit companies across the road development, rail, and water treatment sectors.

Capital Expenditure (In ₹ Crore)

Data Centre

In a significant boost to the data centre theme, the budget provided a tax holiday until 2047 for any foreign company that provides cloud services to customers worldwide through data centre services in India. This could benefit Indian data centre resellers, as foreign companies would need to engage an Indian reseller to access these benefits.

Semiconductor

Companies in the semiconductor sector could also benefit from the launch of the India Semiconductor Mission 2.0. The focus is now on producing the machinery and raw materials required for semiconductor manufacturing.

A key goal is to design a full-stack Indian Intellectual Property system. The budget outlines several initiatives that directly support the semiconductor and data center sectors.

Electronics Manufacturing Schemes

To capitalise on the current investment momentum in the electronics manufacturing scheme (EMS), the government has increased the financial support to ₹40,000 crore, up from  ₹22,919 crore last year. The scheme now prioritises the production of boards (PCBs), capacitors, and resistors. EMSs could continue to benefit from government support.

Critical Minerals/Rare Earth Corridors

In addition to EMS, the budget also exempted basic customs duty on imports of capital goods. To emphasize domestic mining of rare earth minerals, dedicated Rare Earth Corridors will be established in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. This could benefit capital goods and mining companies in the long run as the country gradually ramps up rare earth mining.

Healthcare and Biopharma

Contract Research, Development, and Manufacturing Companies are expected to benefit from ₹10,000 crore outlay through the Biopharma SHAKTI initiative. This includes upgrading 7 existing National Institutes of Pharmaceutical Education and Research (NIPER) and establishing 3 new ones. This initiative aims to develop India as a global hub for biologics and biosimilars.

Hospitals are also expected to benefit from increased medical tourism. The budget proposed a scheme to support states in establishing five integrated medical hubs in partnership with the private sector, offering services ranging from diagnostics to treatment.

Textiles

The budget also proposed an integrated programme for the textile sector to ensure self-reliance and global competitiveness amid tariff threats. This includes the National Fibre Scheme, which aims to achieve self-reliance in natural, man-made, and new-age fibres.

Other initiatives include modernising traditional clusters, strengthening existing schemes, and modernising the textile skilling ecosystem. Also, a mega textiles park will be set up in fast-track mode to add value to technical textiles. This mode will benefit companies across the textile sector.

Tourism

The budget recognises tourism as a major driver of employment and economic growth and proposes initiatives across medical tourism, heritage sites, and skills development. It has been proposed to develop 15 archeological sites, natural trails (trekking and hiking), and Buddhist circuits. An increase in tourism will directly benefit the listed hotel companies.

Waterways/ Shiprepairs

The government sees waterways as a critical component of India's logistics and transport infrastructure. This aligns with India's effort to deepen the port and logistics sector. In line with this, the government aims to operationalise 20 new National Waterways over the next 5 years, with particular focus on NW-5 in Odisha.

This move could benefit dredging companies. Beyond dredging, a dedicated ship-repair ecosystem for inland waterways will be established in Varanasi and Patna. Training institutes will also be established to support employment needs. Overall, these initiatives aim to double the share of inland waterways and coastal shipping from 6% to 12% by 2047.

Nuclear Energy

The budget also proposed a long-term extension of tax breaks for capital investments in the nuclear energy sector. The existing Basic Customs Duty (BCD) exemption on imports of goods required for Nuclear Power Projects has been extended through 2035. The exemption applies to all nuclear plans, regardless of capacity, size, or type. This supports the energy transition, which could benefit companies in the nuclear sector.

Conclusion

These are the central themes on which the budget 2026 focuses. Companies serving these sectors should be kept on the watchlist when constructing a portfolio. However, remember that the budget only shows the probable spending plan, but everything depends on execution. That's why always focus on research company-wise.