Name: Indias budget could be a market sell-off event: BofA Securities
Uploaded: 2026-01-16T09:10:51.169Z
Duration: 3 min 48 s
Description: Amish Shah, Head of India Research at BofA Securities, details his outlook for Indian markets in the coming year. He explains remaining cautious on the IT sector, and what could slow its FII outflows down. He touts that the lack of fiscal room for stimulus measures could lead to a market sell-off.

Amish Shah, Head of India Research at BofA Securities, details his outlook for Indian markets in the coming year. He explains remaining cautious on the IT sector, and what could slow its FII outflows down. He touts that the lack of fiscal room for stimulus measures could lead to a market sell-off.

Delhi

Analysts at BofA Securities have expressed concerns that India's forthcoming budget, scheduled for February 1, may not offer the fiscal stimulus needed to boost markets, potentially resulting in a market sell-off. The firm points to limited fiscal room for either capital expenditure or consumption stimulus, which are both anticipated by investors.

The report also highlights that foreign institutional investor (FII) outflows, which reached a historic high last year, are expected to slow but remain negative until May due to several state elections and increased populism. However, post-May, positive triggers such as potential rate cuts and government reforms could support a return of FII flows, with the overall yearly outlook for FII flows currently assumed to be neutral.

India's budget could be a market sell-off event: BofA Securities

So IT is again one space where last year we were bearish. We are you know not as bearish as we were but we are still bearish because our view is that it will still take some time before you have clarity on US tech spends improving and unless you don't have a sustainable improvement in the US tech spends this is a sector from a large cap sector large cap stocks perspective as well still trades higher than 20-22 P multiple one year forward last year earnings growth was more like 5% including the currency gains it's it looks like it will be 11 12 percent kind of earnings growth but X of currency gains it is still high digit earnings growth sector and remember that the debate on whether it's a structural issue from the AI team that debate will still go on and as a result also we think that that some valuation discount is required so all put in together on bottom-up basis there are certain one-off stocks that we like but once that I mean those unfortunately will not be able to speak so so by and large we still think that reason to be cautious however we are not as cautious as we were last year okay wonderful to know that but you know it with tech the biggest story which is also not talked about as much is the fact that if you talk about India's foreign outflows IT sectors most responsible for that so how does one look at that going forward so outflows in the terms of FII outflows particularly yeah so I think last year as you know we had the historic high FII outflow of 19 billion dollars almost 20 at the end of the correct so I so our view is that you know the run rate of that will slow down you know between January to May itself however some events and triggers for the markets we think are still negative India up to me but post me we think that the events and triggers for Indian market starts to turn favorable and as a me so let's say for example budget which is on the 1st of Feb we don't think that there is enough fiscal room to either do a fist either do a capex stimulus or a consumption stimulus which is both the stimulus that the markets are hoping for so in the lack of both of these we think that the budget may act as a market sell-off event in the month of May there are five local elections including this in amongst them the large states are Tamil Nadu and West Bengal yes generally Kerala Pondicherry Assam as well so five state elections and all of them opposition states except for a Sam absolutely and and around those times we've seen that you know the government has been increasing populism subsidies etc which from a market perspective generally markets don't like populism so we do think that you know up until May events may be you know set up against India and therefore FII flows FII out flows I mean but post me if you look at the events you know there could be fed rate cuts as is widely being expected we think RBI rate cuts could continue there's a pay commission hike report that will be out that will you know which is once in a 10-year pay hike for the central government employees and therefore leads to consumption sector boost and you know over and about that after the May elections up until February of 27 there are no more state elections and that opens a clean window for the government to do reforms and if they do reforms I think markets will be excited and will pay up valuations for that as well so all of this I think is reasons why FII flow should come back to India okay so on a net basis for the year as a whole we think FII flows can be positive but conservatively we are currently working with an assumption of zero

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