Defence Stocks at New Record: A Sector Reclaims Its Firepower
India’s defence sector has seen a remarkable turnaround in recent months. From a prolonged slump that bottomed out in February 2025, listed defence companies have staged a powerful comeback — surging over 50% to hit a record market capitalisation of ₹11.23 lakh crore, surpassing the previous high of ₹10.09 lakh crore seen in July 2024.
This rally, captured in the Nifty India Defence Index, reflects growing investor confidence driven by multiple factors — renewed government commitment to indigenous defence manufacturing, escalating geopolitical tensions, and rising global interest in Indian defence exports. The index, after declining 33% between July 2024 and February 2025, has gained steadily: 24.6% in March, 11.5% in April, and 9% so far in May.
India’s Defence Market Landscape: From Dormant to Dynamic
India’s defence manufacturing ecosystem includes 18 key publicly listed players, ranging from legacy public sector units to emerging private tech-intensive firms. While only six of these stocks have breached their previous all-time highs, many have posted strong recoveries from 52-week lows.
Standouts include:
· Hindustan Aeronautics (HAL)
· BEML, DCX Systems, MTAR Technologies, Dynamatic Technologies, Data Patterns, and Cyient DLM, each of which has surged between 55% and 112%.
· Others like Cochin Shipyard, Mazagon Dock Shipbuilders, Zen Technologies, and Bharat Dynamics have rebounded 58% to 200% since early 2024.
The broader rally, however, remains uneven, with performance concentrated in a few stocks leading the charge.
What Sparked the Rally? Operation Sindoor and Strategic Tailwinds
The catalyst for this sharp recovery is multifaceted. Investor optimism gained fresh momentum following Operation Sindoor, during which India's deployment of the BrahMos missile system showcased its defence readiness and export viability. More than a dozen countries have reportedly shown interest in procuring the system, highlighting the sector’s growing international relevance.
Adding fuel to the fire was a renewed security flare-up between India and Pakistan, reinforcing expectations of increased defence spending in the years ahead.
Policy as the Pillar: Make in India, Atmanirbhar Bharat, and Modernization
The Modi government’s long-standing emphasis on self-reliance in defence — under the Make in India and Atmanirbhar Bharat frameworks — continues to strengthen sector fundamentals. The administration has encouraged domestic production, reduced import dependency, and prioritized technological advancements, including in aerospace and missile systems.
Modernization initiatives and consistent budgetary allocations further bolster investor belief that defence is not just a cyclical theme but a structural growth story. The sector's transformation from a state-dominated, slow-moving behemoth to a competitive export-focused hub is now visibly taking shape.
Institutional Interest on the Rise: Mutual Funds Load Up
Mutual funds have responded enthusiastically, increasing their holdings in 11 of the 18 listed defence firms in April alone. Notable inflows include:
· ₹505 crore into Hindustan Aeronautics, raising its total MF holdings to ₹13,480 crore.
· ₹119 crore into Solar Industries India, with MF exposure climbing to ₹15,510 crore.
· ₹78 crore into Mazagon Dock Shipbuilders.
Other beneficiaries include Zen Technologies, Data Patterns, BEML, and Garden Reach Shipbuilders, with inflows between ₹2 crore and ₹60 crore.
However, some profit-booking has occurred. Bharat Electronics saw the largest outflow, ₹893 crore, though it remains among the most widely held defence stocks with MF exposure of ₹33,619 crore.
Analysts’ Outlook: Tactical and Structural Play
Market experts are bullish. Sandeep Bagla, CEO of Trust Mutual Fund, stated that rising regional tensions will likely continue to push up defence budgets globally, keeping the sector attractive. Anil Rego of Right Horizons PMS described defence as both a structural and tactical play, supported by government reforms, export opportunities, and strong order pipelines.
A Sector Comes of Age
India’s defence sector is no longer just a strategic imperative — it’s a market phenomenon. A combination of robust policy support, global demand for indigenous systems, modernization efforts, and institutional conviction has repositioned the sector as a high-growth, long-horizon investment story.
While volatility may persist due to geopolitical uncertainties and cyclical capital expenditure trends, the foundation is firm. With the global spotlight now turning to India's capabilities, this rally may mark not just a recovery — but the beginning of a new chapter in India's defence industrial journey.
(With agency inputs)
