Shares of defence companies have resumed their up move on the bourses in an otherwise weak market on the National Stock Exchange (NSE) on Tuesday. They rose on expectations of a strong growth outlook on the back of strong government backing.
Bharat Dynamic (BDL), Zen Technologies, Bharat Electronics (BEL), Garden Reach Shipbuilders & Engineers (GRSE), BEML, Hindustan Aeronautics (HAL), Mazagon Dock Shipbuilders (MDL), Paras Defence, Mishra Dhatu Nigam (MIDHANI) and Cochin Shipyard have rallied between 3 per cent and 7 per cent.
At 11:37 am, Nifty India Defence index, the top gainer among sectoral indices, was up 3.4 per cent, as compared to the 0.66 per cent decline in Nifty 50.
The Nifty India Defence index has outperformed the market from its previous month low, with the index surging 24 per cent from its level on April 7, 2025, amid escalating border tension between India and Pakistan. In comparison, the Nifty 50 index has recovered 12 per cent during the same period.
Meanwhile, in the past two months, the Nifty India Defence index has surged 30.5 per cent, as against 10.6 per cent rise in the benchmark index.
In addition to the India-Pakistan conflict last month, India has approved a major government-to-government agreement with France to procure 26 Rafale Marine fighter jets valued at ₹63,000 crore. The agreement includes 22 single-seater Rafale-M jets and four twin-seater trainers, with deliveries expected to be completed by 2031, according to reports.
Defence sector outlook
India was the fourth largest military spender in the world in 2023, after the USA, Russia and China. The Government of India (GoI), in the Union Budget for FY2026, continued the increasing trend in allocation to capital outlay with a year-on-year (YoY) rise of 12.8 per cent in FY2026 Budget Estimates (BE) to ₹1.92 trillion, resulting in a compounded annual growth rate (CAGR) of 7.6 per cent during FY2019-FY2026(BE). This, coupled with the Government’s aim to reduce import dependence, would open up various opportunities and benefit domestic companies, according to ratings agency ICRA.
Buoyed by the increased budgetary allocation, coupled with the Government’s aim to reduce dependence on imports and its production target of ₹1.75 trillion by FY2025, ICRA estimates opportunities worth ₹3.00 trillion for the Indian domestic entities over FY2025 and FY2026, 22 per cent- 23 per cent of which are expected to be accounted for by private sector entities.
India’s defense exports have increased significantly in recent years, reaching a record ₹21,000 crore in FY24 (Source: Defense Ministry). This is a 33 per cent increase from the previous fiscal year. India has set a defense exports target of ₹30,000 crore by FY26. In this context, the new $850 billion plan by the European Union (EU) provides a major opportunity for domestic public and private defence companies, especially for exports of subsystems and components to EU original equipment manufacturers (OEM), said analysts at Elara Capital in the sector report.
Meanwhile, according to the drone federation of India, the country’s drone market revenue will expand from nearly $500 million in FY24 to $11 billion by FY30. With Intelligence, Surveillance, and Reconnaissance (ISR) drones already deployed in conflict zones, leaders stress the need for rapid scaling and reduced reliance on costly foreign systems.
BrahMos is a supersonic cruise missile developed jointly by India and Russia. This plant marks a major leap in India’s pursuit of self-reliance in defence manufacturing. It not only boosts indigenous production but also positions India to meet export demands, potentially making it a global supplier of advanced missile systems.
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