Market Outlook: Union Budget 2026 Analysis Motilal Oswal projects that the upcoming Union Budget 2026 will prioritize a robust defense-led capital expenditure framework. This strategic focus aims to bolster domestic manufacturing and infrastructure while adhering to a strict path of fiscal consolidation. The brokerage anticipates limited direct tax relief for the fiscal year, suggesting the government will rely heavily on substantial RBI dividends to bridge funding gaps. Despite these dividends, elevated borrowing levels are expected to persist, likely keeping bond yields range-bound throughout FY27. Equity markets are expected to favor capex-linked sectors, particularly defense and industrial manufacturing, as primary beneficiaries of the government’s spending trajectory. However, the combination of high borrowing and disciplined fiscal targets may limit broader upside for fixed-income instruments in the near term.