Bazaar & Beyond: Decoding Union Budget 2026, Capital Flows & Market Behaviour Interview with Gaurav Mishra, Co-Head Equity, Mirae Asset Mutual Fund

Vivek Ananth: Hello everyone and welcome to another episode of Bazaar and Beyond. Today, we have with us Gaurav Mishra, Co-Head Equity at Mirae Asset Mutual Fund. In this episode, we decode the cross-currents of Union Budget 2026, the changing US–India trade relationship, and global geopolitics, and how they are impacting capital flows and Indian markets. Gaurav, thank you for taking the time to join us.

Budget 2026: What it gets right, and what to watch

Vivek Ananth: I wanted to start with your view on the Union Budget presented a few days ago. What’s your prognosis, what does it get right, and what needs watching over the next 12 months as it plays out on the ground?

Gaurav Mishra: Good morning, and good morning to our viewers as well. We have to evaluate the Budget in the context of the environment we are in. These are challenging times globally. There is uncertainty due to geopolitics, tariffs, and related developments. So, the first priority was preserving macro stability. I think the Budget does a decent job on that. Second, it had to maintain pro-growth momentum, and the Budget does well there too.If you look at macro stability, post-COVID, fiscal deficits expanded significantly across the world. India’s fiscal deficit had gone beyond 9% of GDP, and over time it has been brought down to 4.4%. The need of the hour was continued consolidation, and this Budget takes it down to 4.3%, with fairly reasonable, realistic, and conservative assumptions.

Nominal growth is assumed at 10%, which should be broadly achievable. Expenses matter, but the key is also revenues, because last year, if there was any revenue shortfall, the government adjusted expenditures to meet the deficit target. On the revenue side, projections are also conservative. Last year overall revenue collections grew about 7%, and this year too it is projected at 7%. Within that, around 10% of tax collections is expected from excise, where growth is higher, and that is justifiable because collections from cigarettes have been raised. Beyond that, which is around 23% of collections, is projected lower by about 2%, because of GST cuts. But if the economy shows better buoyancy, there could be upside surprises in GST collections. There could also be leeway via excise on retail fuels like petrol and diesel. This is not built in, but if crude stays favorable and pump prices allow, there is scope.

On expenditures and moving beyond stability, the Budget is also pro-growth. Over the last couple of years, as deficits were tightened, there was a contractionary impulse because government expenditure growth moderated. This year, the deficit moves only from 4.4% to 4.3%, partly because the medium-term target framework has shifted from just the headline deficit to central government debt-to-GDP. The debt-to-GDP target is 50% plus or minus 1% by FY31. From about 56.1% last year, it is projected around 55.6% this year. This has allowed the government to reduce the contractionary impulse. This year it is only about 10 bps, versus prior years where reductions were closer to 40 bps of GDP or more.

Also, the quality of spending continues to improve. The thrust remains on high productivity areas with strong multiplier effects, infrastructure and capex. We have seen about a 12% increase in allocations to infra and capex. Overall expenditure growth is about 8%, revenue expenditure about 7%, but the most productive part is growing at about 12%. Additionally, PSU capex is projected to grow around 11.5%. And beyond the headline allocations, there are directional signals supportive of medium-term capex. There is mention of seven high-speed rail corridors, there is intent around city economic regions and Tier 2 and Tier 3 urban infrastructure, and there are tax concessions for global investors in data centres.

Data centres have been a big global capex driver, particularly in the US. India is a large data-generating economy, and this incentive could spur private capex in the data centre segment, both for domestic needs and potentially to service other geographies. So, to conclude, the Budget supports macro stability, promotes growth, and continues the structural push on infra and capex. Last year there was also a tilt towards consumption support, but for sustainable growth, all engines must fire, and this Budget reiterates that focus on building capacity and capability.

Valuations, India risk premium, and the earnings question

Vivek Ananth: Indian markets were trading at high forward PEs historically, investors were being asked to pay more. The India risk premium narrative was also discussed a lot. After the Budget and recent trade deal announcements, do you think that narrative continues? And do earnings follow through?

Gaurav Mishra: There are a few questions within that. First, on private investment crowding in. Private capex growth had been slower in aggregate, but it has started picking up. Over the last few quarters, announcements of new projects have increased quarter by quarter. In some very large sectors, power, metals and mining, oil and gas, capex cycles are heavy and they move the aggregate numbers a lot. In other sectors like automobiles, consumption, durables, you may see bottom-up capex, new plants and expansions, but they do not move the aggregate as dramatically. That said, we are hearing more bottom-up capex. Automobiles, PLI-linked manufacturing, and gradually even the larger sectors are seeing announcements and a pickup. The data centre push could also add incremental momentum. So overall, I am constructive that private capex should improve. On market valuations, this question was very valid if we were talking a year ago. Valuations were high, above average. But over the past year, the market has corrected. It is not that earnings have not come. Earnings have come across large, mid and small caps, even if there have been some cuts. Still, there has been mid-single digit and upwards earnings delivery, and time has passed, so valuations have corrected.

The premium India traded at versus the rest of emerging markets has narrowed significantly. It is still at a premium, but closer to the lower end of historical averages. At the same time, globally there has been an AI-led trade. US and some Far Asian markets related to chip-making and AI beneficiaries delivered strong returns, partly because they started with lower valuations than India and then the AI tailwind helped. India underperformed in that phase. Going forward, it depends on whether India’s earnings outlook holds, and whether earnings are not cut further. Corporate earnings growth expectations are still in double digits over the next one to two years. If that plays out, investor interest should strengthen, but we have to watch how it pans out.

STT hikes, speculation, and market behaviour

Vivek Ananth: The Budget raised STT, and markets reacted sharply. There was also commentary around reducing speculation. Retail participation in derivatives is huge. How do you see this pattern playing out, both for sentiment and for the broader capital markets industry?

Gaurav Mishra: For the market and sentiment, the impact is likely short-lived, maybe a day or a few hours. For medium to long term investors looking at equities as an asset class, it does not matter much.

For traders, yes, they will have to recalibrate. Historically, there have been instances where STT increases did not materially impact volumes. This time it could, because the magnitude is meaningful, especially in futures.

I have seen estimates of volume impact ranging anywhere from 0% to 15%. Trades running on very fine margins, especially high frequency and high-volume participants, could see profitability impacted, and that can reduce activity. Retail traders with fine-margin strategies may also be affected. But we will have to see the actual outcome.From a capital markets industry perspective, there are a few brokers with meaningful dependence on derivatives volumes, so their earnings outlook could see some impact. But it is a handful. On the broader market, I do not think it is a big factor.

At a broader level, perhaps this is also a nudge, encouraging markets to be viewed more as vehicles for long-term investment rather than immediate trading for quick money, especially since data shows retail investors often lose a lot in derivatives.

Nudges vs incentives: what changes behaviour?

Vivek Ananth: We saw a lot of income tax nudges before year-end too. Do you think these “nudge” policies work better than tax breaks or incentives when it comes to changing investor behaviour?

Gaurav Mishra: In any market you will have participants across the spectrum. There will be long-term investors, medium-term investors, traders, and many individuals have a mix.

If excess builds up anywhere, it needs to be corrected. If data clearly shows there is excess and a category of traders is consistently incurring losses, then regulators and policymakers may try to slow that down.

At the same time, we need capital markets that are liquid, in depth and breadth. All participation is needed, but not in excess.

More importantly, India has a structural opportunity. Being invested in the market with a long-term horizon, rather than trying to time in and out, tends to matter more for genuine wealth creation and for capital allocation that benefits firms raising resources and investors deploying savings into productive companies.

Gold, safe havens, and whether flows return to equities

Vivek Ananth: We have seen dislocations in gold and strong flows into safe havens. With the US trade deal announced overnight, details still awaited, do you think safe haven flows switch back to equities, and could that support Indian markets?

Gaurav Mishra: Gold has seen strong flows, and both gold and silver prices have spiked recently, after which some correction is natural, and we are in that phase.

Stepping back, the environment suggests safe havens remain relevant. Look at the US. Despite being a leading technology economy, it is highly unequal. Political and tariff-led conflicts may persist in some form because attempts to address inequality often translate into policy actions that create global uncertainty.

Geopolitics is also a feature, not a bug. It is unlikely to disappear soon. Add to that the pursuit of economic sovereignty post-COVID, alongside existing interlinkages, and you get a mix where pressure points can emerge.

We have also seen major countries use system choke points, currency systems, trade mechanisms, settlement systems, as levers. This disrupts confidence in the global order we have been used to since 1945.

So in that backdrop, I think gold remains relevant as a safe haven, and as part of portfolio allocation, around 5% to 10% between gold and silver can make sense. Silver also has industrial use and newer applications.

On whether flows come back to equities, in India we already see steady equity inflows through SIPs. So I do not see major shifts, maybe marginal. Globally, if anything, flows have been chasing AI-linked beneficiaries across markets. I would not assume there will be meaningful reverse inflows into India just because of gold price action.

“Themes” like data centres and high-speed rail: how retail can participate

Vivek Ananth: Retail investors can see these long-term themes, data centres, high-speed rail, electronics, but a lot of value capture seems outside listed markets. How should a retail investor think about participating in these durable themes?

Gaurav Mishra: The answer lies in research, digging deep into industries and value chains.

Take data centres. Beyond the physical shell, there are multiple layers. Construction, electrical equipment, transformers, wiring, cooling and HVAC systems, and other capital goods. One part India may miss at this stage is the chips and compute hardware, GPUs, which will largely be imported. But much of the rest of the value chain can have listed Indian beneficiaries.

Similarly, for high-speed rail, there are many components. Tracks and civil works, signalling systems, locomotives, engines, and multiple equipment categories. The government is pushing Make-in-India and trying to help Indian firms move up the value chain. So retail investors can participate via listed companies that supply into these capex cycles, but it requires bottom-up work to identify who benefits materially.

It will not be a perfect one-to-one proxy. Many engineering companies will have diversified revenue streams. The job is to identify companies with meaningful sensitivity to those capex themes.

Indian market maturity: what has changed for retail investors?

Vivek Ananth: You have seen Indian retail investors and market maturity up close. What is the key difference you have observed, especially around events like the Budget?

Gaurav Mishra: It is a valid observation. A decade ago, with the kind of FII outflows we have seen in recent quarters, markets would not have held up at these levels, we would have been much lower.

This resilience comes from the maturity of Indian investors and also the mutual fund industry doing a good job communicating the product and guiding investors to look at equity as a long-term asset class, with moderated expectations rather than short-termism.

Earlier, retail investors would enter near peaks, like the TMT bubble or the 2008 GFC, burn their fingers, and then stay away for years. But with broader adoption and education around SIPs, we are seeing steady inflows where investors commit with five to ten-year horizons. They are not as perturbed by day-to-day volatility, and they increasingly see volatility as an opportunity.

Closing

Vivek Ananth:Gaurav, thank you for your time and for sharing such a comprehensive perspective, from macro stability to investor behaviour and how to think about long-term themes. It has been a very insightful conversation.

Gaurav Mishra:Thank you. It was a pleasure.

Vivek Ananth:And to our listeners, stay informed, stay curious, and keep investing wisely. Until next time, goodbye.

Disclaimer

Investments in securities markets are subject to market risks. Please read all related documents carefully before investing.