India is one of the strongest military forces in the world and holds a place of strategic importance for the Indian government. The top three largest market segments of the Indian defence sector are military fixed wing, naval vessels and surface combatants, and missiles and missile defence systems.

Over the last five years, India has been ranked among the top importers of defence equipment to gain technological advantages over rival countries such as China and Pakistan. To modernise its armed forces and reduce dependency on external dependence for defence procurement, several initiatives have been taken by the government to encourage ‘Make in India’ activities via policy support initiatives.

In the Union Budget 2025-26:

• In 2025-26, the Ministry of Defence (MoD) was allocated a total Budget of Rs. 6.81 lakh crore (US$ 78.7 billion), which is 9.5% YoY increase from 2024-25 budget. 
• Of this, Rs. 1.80 lakh crore (US$ 20.8 billion) was allocated towards capital expenditure, including the purchase of new weapons, aircraft, warships, and other military equipment
• Defence exports crossed Rs. 21,000 crore (US$ 2.43 billion) in CY24 with a target of Rs. 50,000 crore (US$ 5.8 billion) by 2029.
• Till October 2022, a total of 595 Industrial Licences have been issued to 366 companies operating in Defence Sector. Defence exports grew by 334% in the last five years; India now exports to over 75 countries due to collaborative efforts.

India’s defence production has grown at an extraordinary pace since the launch of the "Make in India" initiative, reaching a record ₹1.27 lakh crore in FY 2023-24, with defence exports rising to an all-time high of ₹23,622 crore in FY 2024-25. Once dependent on foreign suppliers, the country now stands as a rising force in indigenous manufacturing, shaping its military strength through home-grown capabilities. This shift reflects a strong commitment to self-reliance, ensuring that India not only meets its security needs but also builds a robust defence industry that contributes to economic growth.

https://www.ibef.org/industry/defence-manufacturing

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2116612

Key Developments

• Record-Breaking Contracts: In FY 2024–25, the Ministry of Defence signed 193 contracts worth over ₹2.1 trillion, nearly doubling the previous record .The Economic Times+1Press Information Bureau+1
• Rising Exports: Defence Public Sector Undertakings (DPSUs) achieved a 42.85% growth in exports during 2024–25, reflecting the global acceptance of Indian defence products .Press Information Bureau
• Indigenization Push: India's defence production reached ₹1.27 lakh crore in FY 2023–24, marking a 174% rise since 2014–15, driven by the 'Make in India' initiative .Press Information Bureau
• Global Outreach: India is offering low-interest loans through the Export-Import Bank to countries traditionally reliant on Russian arms, aiming to double its arms exports to $6 billion by 2029

As geopolitical tensions rise and national defence takes centre stage, defence stocks has been in focus

📈 Top Defence Stocks in India (2025)

1. Hindustan Aeronautics Ltd (HAL)

• Market Cap: ₹2,16,860.33 crore .
• Overview: A premier aerospace and defence company involved in the design, development, manufacture, and maintenance of aircraft and helicopters.
• Highlights: Strong order book and pivotal role in India's defence modernization efforts.smallcase+1Invest India+1Tickertape

2. Bharat Electronics Ltd (BEL)

• Market Cap: ₹2,32,853.05 crore .
• Overview: Specializes in defence electronics, including radars, communication systems, and electronic warfare equipment.
• Highlights: Consistent performance with a robust product portfolio catering to various defence needs.Screener

3. Bharat Dynamics Ltd (BDL)

• Market Cap: ₹37,294.07 crore .
• Overview: A leading manufacturer of guided missile systems and allied defence equipment.
• Highlights: Key supplier of missile systems to the Indian Armed Forces with a strong R&D focus.DD News+7smallcase+7CoinSwitch+7Tickertape

4. Mazagon Dock Shipbuilders Ltd (MDL)

• Market Cap: ₹1,17,665.89 crore .
• Overview: Engaged in the construction of warships and submarines for the Indian Navy.
• Highlights: Significant contributor to India's naval capabilities with ongoing projects enhancing maritime strength.Screener

5. Data Patterns (India) Ltd

• Market Cap: ₹8,512.36 crore .
• Overview: Provides electronic systems and solutions for defence and aerospace applications.
• Highlights: Known for innovation and a strong order book from defence establishments.smallcaseLakshmishree

6. Paras Defence and Space Technologies Ltd

• Market Cap: ₹4,348.9 crore .
• Overview: Focuses on defence and space optics, defence electronics, and heavy engineering.
• Highlights: Emerging player with niche technologies and growing domestic and international clientele.

7. Solar Industries India Ltd

• Market Cap: ₹1,19,832.82 crore .
• Overview: Manufactures explosives and ammunition for defence applications.
• Highlights: Expanding its footprint in the defence sector with strategic investments and partnerships.Screener

There are many such  stocks listed in Defence space manufacturing different parts for various defence equipments.

 

Final Thoughts:-

Our Preferred pick in this space remains Bharat Electronics with Target price of Rs 405

We remain positive on BEL given strong order backlog (INR 711bn) providing revenue visibility, sustained steady margin profile, healthy order prospects, increasing business opportunity from Indian Navy (indigenization and increasing fleet), continuous focus on diversification (including anti-drone system) & exports markets and indigenisation push by GoI