Veteran market investor and Motilal Oswal Financial Services co-founder Raamdeo Agrawal offered a measured assessment of the Union Budget, focusing less on headline announcements and more on the earnings cycle that will ultimately drive market direction. According to him, foreign institutional investors are likely to return to Indian equities only once corporate earnings momentum becomes clearly visible.

Agrawal projected earnings growth of 12–14% in FY27, indicating confidence in a gradual recovery rather than an abrupt acceleration. For the near term, he expects earnings growth of around 11–12% in the fourth quarter of FY26. These estimates suggest a steady improvement trajectory, but not one strong enough yet to trigger aggressive foreign inflows without confirmation in reported numbers.

What stood out in his Budget reaction was the sharp criticism of the increase in securities transaction tax on futures and options. Agrawal described the STT hike as “totally unexpected,” highlighting that derivatives have become a major contributor to market liquidity and revenue for exchanges and intermediaries. The sudden change, in his view, introduces friction into a segment that has seen rapid retail participation over recent years.

He noted that higher STT is structurally negative for brokerages and fund houses, as it raises transaction costs and potentially reduces trading volumes. From a trader’s perspective, he expects futures and options contracts to become less remunerative, particularly for high-frequency and short-term strategies that rely on thin margins. This could lead to some cooling off in speculative activity, but at the cost of reduced liquidity in the near term.

On the positive side, Agrawal termed the tax holiday extending until 2047 for cloud service providers as a “game changer.” He linked this directly to the global experience, pointing out that the data centre boom has been a significant growth engine for the US economy over the past decade. In his assessment, India missed out on the earlier phase of data centre-led infrastructure expansion, largely due to policy and cost constraints.

The new incentive framework, he believes, creates an opportunity for India to participate meaningfully in the next wave of digital infrastructure build-out. By encouraging global cloud providers to anchor data centres locally, the policy could catalyse investment across power, real estate, cooling and connectivity ecosystems. Over time, this could also support productivity gains across sectors that increasingly depend on cloud computing and data-intensive applications.

Why his comments matter is that they frame the Budget impact through a market practitioner’s lens rather than a macro-only narrative. The emphasis on earnings underscores a broader truth for Indian markets: policy support can create conditions, but sustainable equity re-rating typically follows profit growth. At the same time, his caution on STT highlights the sensitivity of capital market depth to transaction costs.

Market Impact on India

Agrawal’s views suggest that near-term market direction may remain earnings-driven rather than policy-driven. While long-term technology and infrastructure themes may gain traction, higher trading costs could temporarily dampen activity in derivatives-heavy segments of the market.

Sector Impact

Brokerages, exchanges and fund houses could face pressure if F&O volumes moderate due to higher STT. Conversely, technology infrastructure players linked to data centres and cloud services may benefit from the extended tax holiday and renewed investor interest.

Bull vs Bear Scenario

The bullish scenario assumes earnings growth materialises as projected, drawing FIIs back into Indian equities and supporting valuations. The cloud incentive could emerge as a structural growth driver.

The bearish scenario focuses on the risk that earnings recovery disappoints, while higher STT reduces market liquidity and weighs on financial intermediaries’ revenues.

Risk Section

Key risks include slower-than-expected earnings growth, global risk-off sentiment delaying FII inflows, and unintended consequences of higher transaction taxes on market efficiency. Execution of cloud-related incentives will also be critical to translating policy intent into investment outcomes.

Overall, Agrawal’s Budget verdict balances optimism on long-term structural themes with caution on near-term market mechanics, reinforcing the central role of earnings momentum in shaping India’s equity market trajectory.