Budget buzz
The Nifty India Defense Index has risen almost 7% in the past month, buoyed by expectations of major announcements in the Union Budget to be presented on February 1.MTAR Technologies emerged as the best performer with a return of 24%, followed by Bharat Electronics (BEL) and Solar Industries, which posted double-digit gains of up to 15%.
Stocks such as Mishra Dhatu Nigam, Garden Reach Shipbuilders & Engineers (GRSE), Hindustan Aeronautics (HAL), Bharat Dynamics (BDL), Zen Technologies, Mazagon Dock Shipbuilders, Astra Microwave Products, Data Patterns (India) and Paras Defense and Space Technologies posted single-digit returns during the month.
Meanwhile, Dynamatic Technologies, Cyient DLM, Unimech Aerospace and Manufacturing, BEML and Bharat Forge have lagged behind the broader defense package.
Proceeds from the 2025 budget
MTAR Technologies led the rally with a gain of 68.13%, followed by Bharat Electronics (BEL) and Garden Reach Shipbuilders & Engineers (GRSE), which gained 61% and 58% respectively. Solar Industries rose 38%, while Astra Microwave Products and Paras Defense rose 33% and 30%. Among other notable gainers, Bharat Dynamics (BDL) climbed 25.26%, Data Patterns rose 24.30% and Bharat Forge rose 24.16%. Mishra Dhatu Nigam and Hindustan Aeronautics also posted strong returns of 23.46% and 22.49% respectively.
However, the rally has been uneven within the sector. Dynamatic Technologies (12.25%), Cochin Shipyard (10.47%) and Mazagon Dock Shipbuilders (5.29%) posted modest gains, while BEML finished marginally lower. Sharp corrections were seen in Zen Technologies (-24.08%), Cyient DLM (-28.61%) and Unimech Aerospace (-34.27%), highlighting the divergent stock-specific performance within the defense sector post-budget.
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Budget expectations
Brokerage firm JM Financial has set the defense allocation at Rs 1,85,400 crore for FY27E, an increase of 9% over the previous budget. This is likely to be maintained at 0.5% of GDP, the note said.
Nuvama Institutional Equities expects an 8% growth in defense investments with higher allocation to R&D, UAV/drones, anti-drone systems, etc. “The incremental budget will be sought in the backdrop of Operation Sindoor, as well as some key major programs in the pipeline (QRSAM, P-75I, Pinaka, etc.) are likely to materialize, leaning towards the Air Force and Navy,” the broker said.
Anand Rathi Research expects an increase of over 15% in capital expenditure on capital equipment and defense due to a strong pipeline of DAC approvals and a strong need for modernization of defense equipment with hostile neighbors. If the ‘capital-heavy + domestic first’ stance holds, the pipeline award is expected to be across platforms, munitions and network-centric capabilities, this brokerage said.
What to do with defense stocks?
The likely increase in the defense budget for FY27 will be structurally positive, accelerating the shift to execution-oriented gains, Nuvama said. Stock selection remains key, with preference given to players that offer faster execution, higher localization and superior cash conversion, rather than just overall order book growth.
Also read: Budget 2026: Indian stock market to remain open on Sunday, February 1 – only the second time in history
Stocks to buy
Axis Securities has recommended MTAR and BEL as preferred picks in the pack, while Anand Rathi is betting on Solar Industries or HAL.
(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times.)
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