Budget 2026 likely to be a non-event for the markets: Jio BlackRock AMC CIO

It has been a nervous start to calendar year 2026 for the Indian stock markets as they navigate through global uncertainties. Rishi Kohli, chief investment officer, Jio BlackRock AMC, tells Puneet Wadhwa in an in-person interview in New Delhi that there has been significant representation to the government on the Securities Transaction Tax (STT) cut, and that remains something markets are watching closely. Edited excerpts:

 

Is there a risk of disappointment as regards markets over the next three to six months?

Over the past few months, my view has been that markets would maintain a slightly positive bias, though with volatility. The key risks are largely global in nature, particularly geopolitical developments. That said, most of these risks appear to be well priced in by now.

 

 

One important factor has been earnings growth back home, which disappointed for nearly five consecutive quarters—from the last quarter of 2024 through the previous quarter. Based on available data, December and March quarters were expected to show marginal improvements.

 

If a gradual pickup in earnings continues, markets should be able to sustain positive momentum. That said, volatility during January and February was expected. There is a clear seasonality during this period—when markets rally into the year-end, January–February often sees consolidation or mild corrections. The recent decline over the past few days fits that template and is not surprising.

 

Overall, I continue to hold a mildly positive view. I am not expecting anything dramatically positive, but if marginal earnings improvements persist, confidence should gradually return. One quarter can be an aberration, but once you have two or three quarters of consistency, sentiment starts improving meaningfully.

 

You had earlier mentioned mid-caps as an area to watch for earnings revival. Is that showing up?

It is still early in the results season, but on the margin, the picture hasn’t changed materially. From an earnings standpoint, large-caps and mid-caps continue to look relatively better compared to small caps. Smallcaps are still weaker on earnings visibility. Between large-and mid-caps, leadership may shift from time to time; but overall, I would still expect large and mid-caps to outperform small caps from an earnings perspective.

 

What are your expectations for FY27 earnings growth?

At the market level, we expect earnings growth of around 12 per cent for FY27. Since markets broadly track earnings over time, that would imply a similar magnitude of returns.

 

How long do you expect the current consolidation phase to last?

January through mid-March is typically a consolidation phase. If March quarter results fail to deliver on expectations, that could weigh on markets. However, even modestly positive data would be enough to set the stage for one to one-and-a-half years of relatively good performance ahead.

 

What are your expectations from the upcoming Union Budget?

Expectations are fairly muted. Fiscal and monetary room is limited. The fiscal deficit is likely to be around 4.4 per cent this year and 4.2 per cent next year, with only minor adjustments to the glide path. Any incremental push on capital expenditure would be positive, but more important is sentiment. A pickup in sentiment is what ultimately translates into sustained corporate capex, which so far has been sporadic rather than continuous.

 

On taxation, there is limited room for large changes. There has been significant representation to the government on Securities Transaction Tax (STT), and that remains something markets are watching closely. However, even if nothing happens on STT, I don’t see it as a major negative since expectations are already low.

 

Also, markets are entering the budget on a relatively soft footing. When markets go into a budget with excessive optimism, the risk of disappointment is higher. That is not the case this time, so the scope for a sharp negative reaction seems limited. Some knee-jerk intraday volatility is always possible, but nothing structural. Overall, the budget is likely to be a non-event for the markets.

 

Gold and silver exchange traded funds (ETFs) have seen strong inflows. Could any tax-related changes there hurt sentiment?

Gold and silver ETFs already face relatively unfavourable taxation. This is why many investors choose not to exit even with large gains before completing one year. From a broader perspective, it is actually healthy for India to develop commodity markets. India has traditionally been an equity and bond market, with limited commodity participation beyond gold and silver. Over time, developing spot markets and ETFs for commodities like copper would be far more constructive than tightening taxation further on existing gold and silver products.

 

Commodity price movements are largely global and driven by supply-demand dynamics. Structural deficits in commodities such as silver, copper, and aluminium are expected to persist for years. Local tax measures cannot meaningfully alter these trends, so tightening taxation further doesn’t make much sense.

 

How do you see geopolitical risks and tariff-related issues playing out over the next six months?

My view remains mildly positive. Most negative scenarios have already been absorbed by markets. Tariff threats and geopolitical rhetoric have become a known wildcard, and markets are largely aware of them. If anything, the risk is now slightly skewed to the upside—especially if trade negotiations turn out better than expected. Minor negative surprises may still occur, but the high-level impact is already reflected in prices. Any marginal improvement could provide upside rather than downside.

 

Tell us more about the sector rotation fund you plan to launch and how it differs from your Flexi Cap strategy?

The Flexi Cap strategy is largely bottom-up. Around 85 per cent of long-term alpha comes from stock-specific factors, bout 10–15 per cent from sector allocation, and only around 5 per cent from style factors.

 

The sector rotation strategy is the opposite—it is top-down. Alpha is expected to come primarily from sector allocation rather than stock selection. We take sector-level views and invest across all stocks within selected sub-sectors.

 

We operate at the Level-2 sector classification, which consists of about 25 sub-sectors—such as separating banks and NBFCs rather than grouping them under financials. This provides enough granularity without becoming impractical, as Level-3 sectors can be too narrow.

 

Unlike traditional sector rotation funds that concentrate heavily in three or four sectors, this approach remains well diversified. Typically, 18–19 sectors will be represented at any point, but with very active weight differentials. Sector weights can range from zero to double the benchmark weight, which is where alpha is generated.

 

What are the current sectoral positions?

As of the most recent signals—keeping in mind we are close to launch—the model is overweight on banking, materials, and pharmaceuticals, and underweight on IT and FMCG. These positions will evolve over time as signals change.