Union Budget Deconstructed: Consolidation with selective impact

After two years of active tax reforms, the FY27 Union Budget largely stayed the course, signalling consolidation rather than sweeping change. While the headline suggested a status quo budget, a closer reading reveals a handful of targeted tax measures and fiscal choices with meaningful implications for investors and markets.

Highlights:

• Targeted tax changes to note: Higher STT on futures and options, capital gains tax on secondary-market SGBs, and buybacks now taxed as capital gains for minority shareholders.
• Two avoidable negatives: The timing of the STT hike amid weak market performance and FPI outflows, and a higher gross borrowing programme despite an elevated yield curve.
• Fiscal discipline remains a positive: Continued focus on consolidation reassures macro stability in a volatile global environment.
• Capex and growth priorities intact: Capex projected to grow over 11% YoY, supported by realistic revenue assumptions and RBI dividends, with policy direction towards data centres, REITs, AI, and electronic manufacturing.