Most Indian defence stocks, including Garden Reach Shipbuilders & Engineers (GRSE), Bharat Dynamics (BDL), Mazagon Dock, Bharat Electronics (BEL), Cochin Shipyard and Hindustan Aeronautics (HAL) ended the first half of the calendar year 2025 (H1CY25) with strong gains.
The Indian defence sector witnessed strong traction in the first half of the year, as the India-Pakistan conflict brought the country’s defence capabilities into global focus, boosting prospects for increased demand in the sector.
Shares of Sika Interplant Systems surged 172 per cent in H1CY25, while those of GRSE, Solar Industries, BDL, Apollo Micro Systems and Paras Defence surged 59-86 per cent during the period.
A few players from the sector, however, bucked the trend. Shares of Dynamatic Technologies, Zen Technologies and DCX Systems fell 15-21 per cent.
What drove the defence stocks?
Strong order flow, anticipation of durability of demand amid changing geopolitical scenario and global focus on Indian defence equipment due to their performance and effectiveness are the key factors that shot up defence stocks this year.
Navjeet Sobti, Senior Executive Director at Almondz Global Securities, pointed out the robust orderbook of India defence companies, with HAL ( ₹1.89 lakh crore), BEL ( ₹72,000 crore), Mazagon Dock ( ₹32,000 crore), BDL ( ₹22,700 crore) and BEML ( ₹14,600 crore) among the key players.
Will the trend sustain?
The defence sector’s medium to long-term outlook remains strong amid the prospects of increased demand.
There are also expectations that the government may increase the defence budget next year, in light of recent aggression from neighbouring countries such as Pakistan, China, and Bangladesh.
Nandish Shah, AVP– PCG Research & Advisory, (Fundamental) Wealth Management, Motilal Oswal Financial Services, expects defence sector orders to remain strong in the coming quarters.
Shah pointed out that in the FY26 Budget, defence was allocated ₹6.81crore, a 9.5 per cent increase over FY25. Government capex in March and April 2025 showed strong spending on defence, contributing significantly to the highest-ever monthly capital expenditure.
After Operation Sindoor, Shah expects the finalisation of emergency procurement pipelines for the defence sector and contracts for large projects in the near term.
Shah further underscored that defence companies are eyeing bigger opportunities from exports of larger platforms such as the Akash missile, MRSAM (medium-range surface-to-air missile), and defence control systems, where domestic companies have already established their product quality in the domestic markets.
Prashanth Tapse, a senior VP of research at Mehta Equities, too, believes that investor sentiment towards the sector is expected to remain structurally positive in H2CY25.
“While short-term valuations may appear stretched in pockets, long-term visibility in revenues and margins for key players justifies a buy-on-dips strategy for patient investors,” said Tapse.
Ajit Mishra, SVP of research at Religare Broking, pointed out that the recent surge has also introduced valuation risks, and near-term volatility is likely.
Mishra says investors must be selective, focusing on companies with strong order books, healthy financials, and proven execution capabilities.
“While the rally reflects short-term momentum, the long-term story remains intact, especially as India strengthens its defence posture in an increasingly uncertain regional environment,” said Mishra.
What defence stocks should you buy?
Shah of Motilal Oswal Financial Services is positive on BEL and HAL.
Tapse also chose HAL and BEL as his preferred picks in the sector for an investment horizon of two to three years.
He suggests HAL because of reasonable valuations, given its EPS growth potential and expected catalyst, high export orders book, and possible Nifty inclusion in the coming few months.
For BEL, Tapse said it is a key player in electronic warfare, radars, command control systems and high-order inflows in the coming months are expected.
Sobti of Almondz Global Securities also suggests BEL and HAL for the long term.
“BEL, a Navratna DPSU, has a strong orderbook of ₹72,000 crore as on FY25, which provides medium to long-term revenue visibility, with management guidance for 15 per cent revenue growth in FY26,” Sobti underscored.
“HAL boasts a strong order book of ₹1.8 lakh crore as of March 31, 2025, along with a promising prospect pipeline of ₹6 lakh crore, which is likely to be awarded over the next few years. The orderbook is expected to be executed in the next five to six years,” Sobti added.
Read all market-related news here
Read more stories by Nishant Kumar
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
