Raamdeo Agrawal, one of India’s most respected market voices, described the Union Budget 2026 as “a masterstroke for India’s digital future.” He singled out the 100% tax holiday for data centres until 2047 as a defining policy move, calling it a “‘1,000-pound gorilla’ decision.” Drawing parallels with the software boom of the 1990s, he said, “We are already adopting AI; now we are building the ‘AI Factory of the World,’ firing up massive capex in power, cables and infrastructure.”

The market veteran also said that the long-term earnings story for India remains firmly intact despite near-term market headwinds triggered by the increased securities transaction tax (STT) in the Union Budget 2026 earlier today. “But with a prudent 4.3% fiscal deficit and a 12.2 lakh crore capex push, the long-term earnings story remains the real hero for India,” Agrawal, Chairman and Co-founder of Motilal Oswal Financial Services said.

Under the Budget proposals, STT on futures has been raised to 0.05% from 0.02%, while the levy on options premium has increased to 0.15% from 0.10%. In addition, the tax on the exercise of options has been hiked to 0.15% from 0.125%. While acknowledging that these measures could dampen trading activity in the short term, Agrawal cautioned that the removal of dividend set-offs and higher transaction costs would likely act as a headwind for markets. “They make many high-frequency and arbitrage trades unviable, which will squeeze market liquidity and leverage in the short term,” he said after the Budget presentation.

That said, Agrawal stressed that the bigger picture remains constructive. He urged investors to closely track the forthcoming monetary policy, highlighting that sustained credit growth of 13–15% would be critical to achieving nominal GDP growth of over 10%.

Agrawal added that the finer details of the Budget are just as significant. The expansion of the definition of IT services provides long-awaited transfer pricing clarity for global capability centres (GCCs), sending a strong signal that India is open for high-end technology businesses.

In the Budget, Nirmala Sitharaman doubled down on the government’s infrastructure-led growth strategy in Union Budget 2026, proposing a sharp increase in capital expenditure to Rs 12.2 lakh crore for FY2026–27, up from Rs 11.2 lakh crore in the current fiscal.

On the macroeconomic front, the government projected GDP growth of 7.4% for the current financial year, with inflation expected to stay close to 2%. The fiscal deficit was pegged at 4.4% of GDP, signalling continued commitment to fiscal consolidation even as public spending remains elevated.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)