Dear Investors,
The market has been volatile since the start of the year. The Nifty closed January 2026 well below the psychologically important 26,000 level at 25,321 (down 3% month on month). The Sensex closed Jan below the psychologically important 85,000 level at 82,270 (down 3.5% month on month). Midcaps and small caps underperformed versus large cap stocks. FIIs continued to be net sellers in January 2026, pulling out Rs 35,962 crores (on a net basis). Mutual funds, on the other hand, supported the market as net buyers with purchase of Rs 36,648 crores. India was an underperformer in the emerging market pack. All sectors except metals was in red in January. Realty, Telecom, Consumer Durables, Auto, Healthcare and Infra underperformed the broader market index in January 2026.
Budget highlights
Fiscal deficit target has been set at 4.3% of GDP for 2026-27, reaffirming the government's commitment to fiscal consolidation. In RE 25-26, the fiscal deficit has been estimated at par with the Budget estimates of 25-26, at 4.4% of GDP. Finance Minister proposed to raise capex target to Rs 12.2 lakh crore for FY27 from Rs 11.2 lakh crore earmarked for current fiscal. India will target a debt-to-GDP ratio of 55.6% for the fiscal year 2026-27, Finance Minister Nirmala Sitharaman said, down from the near 56.1% in the current year.
TCS rate for pursuing education and medical education under liberalized remittance scheme has been reduced from 5% to 2% per cent. TCS on overseas tour packages has been cut to 2%, down from the earlier rates of 5% and 20%, with no minimum amount condition. This will lower the upfront tax burden when booking international tour packages. Income Tax Act, 2025, will come into effect from 1 April 2026. The New Income Tax will be revenue neutral i.e., no change in rates for taxpayers, however the rules will be simplified. The simplified income tax rules and forms will be notified shortly, giving adequate time to taxpayers to acquaint themselves with its requirements.
The Budget's proposal to increase STT on the sale of futures to 0.05% (from 0.02%) and raising STT on options premium and exercise of options to 0.15% (from of 0.1% percent and 0.125% respectively) caused a bloodbath in the market with the Nifty crashing by 230 points.
US India Trade Deal
The market has rebounded after the successful negotiation of Indo US Trade Deal. Tariffs on India's exports to the US have been reduced to 18%. This will make India's exports to the US more competitive than many other countries who have higher tariff rates imposed on their exports to the United States. While India has reduced tariffs on US industrial goods exports, it has maintained protection on agricultural goods. Overall market mood seems to be bullish, and Nifty is expected to breakout above the psychologically important 26,000 level in the coming days and weeks.
With narrowing fiscal deficit, robust GDP growth (FY 26 real GDP growth rate forecasted at 7.4%) and revival in consumption growth, the long-term outlook for Indian equities remains very bright. Investors should remain disciplined and continue to invest through SIP.
Assuring you of our best services.
Best Wishes,
Ajoy Agarwal,
(Managing Director)
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