Defence-linked stocks are likely to remain in focus during the Union Budget 2026 on Feb. 1, as investors factor in a moderate increase in defence outlay and continued emphasis on indigenisation. While the market is not expecting major surprises on headline allocations, attention is firmly on execution momentum, faster order finalisation and clarity on procurement timelines.
Among defence PSUs, companies with strong order books and execution visibility are expected to stay in the spotlight. Hindustan Aeronautics is seen benefiting from its aircraft and engine manufacturing pipeline, while Bharat Electronics remains a key play on defence electronics, radar and communication systems. Bharat Dynamics is also on investors’ radar given its role in missile manufacturing, while shipbuilders such as Mazagon Dock Shipbuilders and Garden Reach Shipbuilders are being tracked amid ongoing naval modernisation.
Private sector defence manufacturers are also expected to attract interest as the indigenisation push gathers pace. Larsen & Toubro remains a key beneficiary of large platform and systems integration projects, while Bharat Forge, Data Patterns and Astra Microwave are seen gaining from increased localisation of components, electronics and subsystems.
