Budget 2026: As markets fell, data centre & AI stocks surged after tax holiday for cloud services

Even as markets reported the worst post-Budget fall in seven years, data centre and artificial intelligence (AI) stocks on Sunday surged as Union Finance Minister Nirmala Sitharaman proposed a 20-year tax holiday for foreign companies setting up data centres in India.

Shares of companies linked to data centres, AI, and cloud services surged as Sitharaman sought to attract data centre- and AI-related investments with proposals for a tax holiday and safe harbour rules.

Sitharaman proposed that foreign companies setting up data centres in India to provide services to customers outside India would not pay any income tax till 2047. She further proposed a ‘safe harbour of 15 per cent’ on cost in cases where the company providing data centre services from India would be a related party.

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These proposals incentivised the setting up of data centres in India, provided regulatory and compliance clarity, and conveyed the government’s push for India to be the global back end for cloud and AI services.

As a result, shares of AI and data centre companies rose: E2E Networks gained 8.56 per cent, Anant Raj rose 6.57 per cent, and Netweb Technologies India gained 5.27 per cent. Additionally, technology companies Coforge, Tata Consultancy Services (TCS), Persistent Systems, and Wipro gained more than 2 per cent.

This was in sharp contrast to the broader markets, which saw the worst post-Budget fall in seven years: Sensex fell 1,843.46 points (2.23 per cent) in the worst post-Budget fall since 2019, and Nifty 50 fell 593.45 points (2.33 per cent) in the worst post-Budget fall since 2020.

Post-Budget performance of markets in recent years:

The proposed tax holiday till 2047 has signalled a clear strategic push for foreign companies, Ritvik Dashora of Tradomate told CNBC-TV18.

“The government is positioning India not just as a digital consumption market, but as a global backend for cloud and AI infrastructure,” Dashora said.

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As data centres are capital-intensive and take years to break even, policy certainty over two decades —through a tax holiday till 2047— materially improves project returns and could make India more competitive with established hubs like Singapore and Ireland in attracting hyper-scalers and global cloud players, according to Dashora.

As for the broader decline of the market, the fall was reported across indices and sectors. For example, Bank Nifty fell below its 20-day and 50-day exponential moving averages (EMA), signalling that momentum has turned negative in the short term and that some of the Budget proposals likely made investors nervous.