Defence stocks are emerging as one of the market’s standout performers this year, with the Nifty India Defence pack rallying 19% amid a powerful confluence of geopolitical uncertainty and policy-driven tailwinds.
Among the 18 Nifty India Defence index constituents, 14 are in the green on a year-to-date (YTD) basis, and nine have given double-digit returns, as per data from NSE. Shipbuilder Garden Reach Shipbuilders & Engineers (GRSE) emerged as the top-performing defence stock this year as it rose 45% in 2025 alone.
MTAR Technologies, Paras Defence and Bharat Electronics have seen a rise of upwards of 30%. Bharat Dynamics shares have jumped 26% and Astra Micro has rallied 24% in the same period. On the flip side, Zen Technologies stock has been the biggest drag in the index, with a 45% crash.
Cyient DLM, Unimech and BEML have also been under pressure, losing 11-38% YTD.
| Nifty India Defence Index Constituents | YTD returns |
|---|---|
| GRSE | 45.63% |
| MTAR Technologies | 39.65% |
| Paras Defence | 33.59% |
| BEL | 32.90% |
| Bharat Dynamics | 26.29% |
| Astra Micro | 23.73% |
| Solar Industries | 20.12% |
| Bharat Forge | 12.61% |
| Dynamatic Technologies | 10.66% |
| Mazagon Dock | 8.57% |
| Midhani | 4.81% |
| HAL | 4.02% |
| Data Patterns | 3.78% |
| Cochin Shipyard | 2.56% |
| BEML | -11.34% |
| Unimech | -37.34% |
| Cyient DLM | -38.54% |
| Zen Technologies | -45.38% |
| Source: NSE |
What’s behind defence stocks’ rally?
The defence playbook is being influenced by a confluence of factors like massive order backlogs, geopolitical conflicts, Atmanirbhar Bharat and export push.
In India, the Ministry of Defence signed a record 193 contracts worth over ₹2.1 trillion in FY25. This has given companies like HAL and BEL “visibility” for the next 5–10 years, said Santosh Meena, Head of Research at Swastika Investmart.
Shift to domestic procurement reached a milestone in 2025, with 92% of contracts going to domestic firms. This has significantly improved the margins of local players who previously acted only as sub-contractors, Meena said, adding that India’s defence exports also hit an all-time high of ₹23,620 crore in FY25, proving that Indian-made tech is now globally competitive.
Meanwhile, the year 2025 had no dearth of global tensions from the Russia-Ukraine war, Middle East instability, and India-Pakistan conflict, like Operation Sindoor, forcing a shift to defence acquisitions by the countries.
Vinit Bolinjkar, Head of Research, Ventura, said a record defence budget of ₹6.81 lakh crore, strong export growth reaching ₹21,000 crore in FY25, multi-year order books, and policy stability from Make in India fueled the rally, with the Nifty India Defence Index delivering solid returns despite mid-year corrections.
Can defence stocks sustain momentum in 2026?
The sharp surge has also raised concerns around the valuations of these companies, forcing investors to reconsider if the multibagger defence stocks still deserve a spot in their portfolios.
Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital, said the main concern for defence stocks is the valuations. “The pure-play weapons equipment-related defence stocks trade at valuations ranging from 34 to 178. The median PE of the defence pack is 50+. This is still very high, despite the recent fall,” he said.
Against this backdrop, Meena expects to see the market rewarding companies with high execution capabilities and those focused on Next-Gen Tech rather than a sector-wide surge. Therefore, while the rapid “skyrocketing” phase may slow down as valuations become more realistic, the long-term structural growth remains intact, he added.
OmniScience Capital’s Gupta expects the defence growth vector to last for multiple decades and thus becomes an “inevitable” in a long-term investor’s portfolio despite his word of caution on the valuation front.
Top defence stocks to buy
Commenting on the top defence stocks to buy, Bolinjkar listed three names: Astra Microwave, Bharat Electronics and Hindustan Aeronautics.
Astra Microwave Products: Strong buy candidate with 18-23% CAGR in revenue, EBITDA, and PAT through FY28, driven by high-margin exports and EBITDA margins expanding to 25.6%.
Bharat Electronics (BEL): Robust order inflows ( ₹12,539 crore till Oct 2025), 25% YoY PAT growth in Q2 FY26, and export push to 10% of turnover;
Hindustan Aeronautics (HAL): Benefiting from massive ₹62,370 crore LCA Mk1A order; strong indigenisation and order visibility underpin multi-year growth.
At the same time, Santosh Meena says BEL is the defensive backbone with a ₹74,000+ crore backlog and a debt-free balance sheet, making it a “safe-haven” play on defence electronics.
He is also bullish on Mazagon Dock as it offers a near-monopoly on high-value submarine and warship construction with significant visibility into the Indian Navy’s multi-decade modernisation.
“Solar Industries provides a unique recurring-revenue model through explosives and ammunition consumables that benefit from both high domestic demand and a booming export market, and Data Patterns represents a high-margin, high-tech play on specialised R&D and indigenous electronic warfare suites, often achieving 35–40% margins due to deep intellectual property ownership,” Meena added.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
