Budget may boost defence, electronics, renewables, and consumer durables sectors
Investors planning to trade around the Union Budget 2026 need to factor in settlement rules, as a settlement holiday is expected to affect equity transactions during the period.
Shares bought on January 30 cannot be squared off on February 1, despite the stock market remaining open on budget day. This is due to a settlement holiday, which disrupts the normal settlement cycle and could impact short-term trading strategies.
A settlement holiday refers to a day when trading continues on exchanges such as the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), but the actual transfer of shares and funds does not take place as banks, clearing corporations, or depositories like NSDL and CDSL remain closed. As a result, settlements are deferred to the next working day.
The NSE has clarified in a circular that on February 1, 2026, the Union Budget day, markets will operate during normal hours from 9:15 am-3:30 pm. While investors will be able to buy and sell shares during this session, settlement of trades executed on that day will take place on the following working day. This also means that shares purchased on February 1 cannot be sold on February 2.
Meanwhile, global brokerage firm Jefferies expects the government to raise capital expenditure by around 10% in the upcoming budget, with a strong emphasis on the defence sector. A potential 20% increase in defence capex could benefit defence public sector undertakings and allied companies.
Jefferies also expects higher allocations to the production-linked incentive (PLI) scheme, particularly for electronics manufacturing, which could support companies such as Dixon Technologies. Renewable energy, electronics manufacturing, and consumer durables are among the sectors likely to remain in focus based on budget announcements.
Additional allocation for solar irrigation pumps could provide a boost to renewable energy stocks, while provisions related to pay commission could support demand in the consumer durables segment. The brokerage added that an increase in the tax exemption limit for traditional life insurance policies could be positive for life insurance stocks.
The banking sector is expected to benefit from measures aimed at improving deposit growth, while affordable housing finance companies may gain if the interest subsidy scheme is expanded.
