Amish Shah is a senior analyst at Bank of America Securities. He believes that Indian stocks will face volatility in the first six months of 2026.
Shah, speaking this morning to CNBC, said that the near-term is stacked against investors. The February 1st Union Budget will likely disappoint those who expect stimulus.
Analysts warn that while foreign inflows may turn positive in later months of the year, H1 is likely to be marked by political and fiscal uncertainty before the more favorable window appears after May.
Why the Union Budget may spark a sell-off in the market
Amish Shah believes that the Indian stock market will be impacted by the budget. He noted in the CNBC Interview:
The markets want both a consumption and a capital expenditure stimulus. We do not think there is fiscal space to provide either.
Shah is convinced that the market will fall next month if neither of these measures are taken.
The government has limited flexibility in its fiscal policy, which leaves investors with little room to maneuver.
In the immediate aftermath of the budget, volatility is likely to occur due to the absence of stimuli, coupled with the cautious flows from foreign institutions.
What else can hurt Indian stock prices in 2026?
Shah cited political developments, in addition to the Union Budget, as another factor that could affect Indian stock prices over the next few months.
Five states will hold elections in May. These include “Tamil Nadu”, “West Bengal”, Kerala, Puducherry and Assam.
The analyst at BofA says that governments often increase “populist” measures around elections, and “markets don’t always like it.”
This populist spending, combined with fiscal caution, may discourage foreign investors and lead to possible outflows. Shah said that sentiment would remain fragile until May as the events were “set against India”.
How Indian stock prices may change post-May
The Bank of America analyst sees Indian shares in a “more constructive environment” after May, despite near-term difficulties.
He noted that “after May we believe events and triggers in Indian markets begin to change for the better.”
Stock price increases could be supported by several factors in the second quarter of 2026. This includes potential Fed rate reductions and the Reserve Bank of India’s (RBI) continued ease.
The H2 market could also be boosted by the once-per-decade increase of central government employee’s pay commission. This boosts consumer spending.
After the elections in May, India will not have any more state-level polls before February 2027. This gives the government “a clean window” to implement reforms.
Shah thinks reforms can excite the markets and boost valuations. Amish Shah is BofA’s India head of research. He concluded that FIIs should return to India.
The post Why Indian Stocks may fall after Budget announcement by an Analyst may change as new information is revealed.
