The report said the budget sends a strong signal on the government’s future growth priorities, with the finance minister’s speech almost opening with a reference to semiconductors. Morgan Stanley noted that this reflects a meaningful shift in policy focus towards technology-led growth and advanced manufacturing.
“We remain constructive on Indian equities—overweight Financials, Consumer Discretionary, and Industrials,” the report stated, adding that these sectors are well placed to benefit from the budget’s growth-supportive measures and continued emphasis on capital spending.
Morgan Stanley highlighted that the government’s fiscal deficit target of 4.3 per cent of GDP for FY27 is broadly in line with its own estimate of 4.2 per cent. The fiscal trajectory, it said, is consistent with a central government debt-to-GDP ratio of 55.6 per cent in FY27, underscoring the authorities’ commitment to fiscal discipline.
According to the report, the combination of growth-oriented policies, support for emerging sectors such as semiconductors and artificial intelligence, and manageable fiscal consolidation creates a favourable environment for equities.
The investment bank also believes that the policy direction outlined in the budget could improve medium-term earnings visibility, particularly for sectors linked to domestic demand, financial intermediation, and industrial expansion.
Overall, Morgan Stanley said the Union Budget 2026 reinforces its positive stance on Indian equities, with financials, consumer discretionary, and industrials remaining its preferred sectoral bets.
