HAL, BEL, BDL: Defence stocks rise up to 100%; Will rally continue amid Indo-Pak tensions?
Defence electronics and technology firms specialising in radar, missile guidance, AI, and cybersecurity, including BEL and Astra Microwave Products, are increasingly vital for modern warfare capabilities
- May 14, 2025,
- Updated May 14, 2025 2:20 PM IST
All eyes are turned to defence-related stocks amid the ongoing tensions between India and Pakistan. Data shows select stocks from the sector have already delivered superlative returns to investors in the past 1 year till May 13, 2025.
With a rally of 107%, Krishna Defence and Allied Industries emerged as the top gainer in the sector. It was followed by Paras Defence and Space Technologies (up 104%), Bharat Dynamics (up 91%), and Zen Technologies (up 67%).
So, what to expect from the defence sector going ahead? In an interaction with Business Today, Ravi Singh, SVP-Retail Research, Religare Broking, shared his insights:
BT: What is your take on the country’s defence sector in the context of continued Indo-Pak tensions?
Singh: India’s defence sector is strategically vital, and ongoing Indo-Pak tensions continue to drive its modernisation and growth. Persistent border conflicts, terrorism concerns, and security challenges in Kashmir have reinforced the need for high military preparedness. The government’s push for self-reliance under the Atmanirbhar Bharat initiative has further boosted domestic manufacturing, limiting imports and encouraging private-sector participation. Defence PSUs and private firms are benefiting from long-term procurement plans and growing export opportunities. The sector’s focus on innovation, self-reliance, and global partnerships aims to strengthen national security and position India as a future global military power.
BT: The sector has witnessed robust earnings growth in the past 10 years. How do you see the trend going ahead?
Singh: The earnings growth outlook for Indian defence companies remains robust, driven by supportive government policies, rising geopolitical tensions, and a sustained push for indigenisation. With the Indian government placing increased emphasis on national security and self-reliance, the defence sector is experiencing consistent budgetary support—particularly in capital expenditure. This trend is expected to continue in the upcoming Union Budget, further strengthening domestic manufacturing and procurement pipelines. Policy initiatives like ‘Atmanirbhar Bharat’ are accelerating large-scale order inflows and encouraging greater participation from the private sector. As a result, defence firms are gaining revenue visibility and expanding their production capabilities. Additionally, growing export potential and strategic collaborations with global players are enhancing the sector’s long-term growth prospects.
BT: Which categories of defence players (e.g. PSU, private, electronics, manufacturing) do you expect to remain in the limelight, and why?
Singh: India’s defence sector will continue to spotlight Public Sector Undertakings (PSUs) like Hindustan Aeronautics (HAL), Bharat Electronics (BEL), and Bharat Dynamics (BDL) for their critical role in manufacturing key platforms such as fighter jets, missiles, and naval vessels, backed by strong government support. Simultaneously, private sector manufacturers, including Tata Advanced Systems, Larsen & Toubro, Bharat Forge, and Adani Defence are rapidly rising due to government initiatives like ‘Make in India’ and relaxed FDI norms, enabling greater indigenous production and global partnerships. Additionally, defence electronics and technology firms specialising in radar, missile guidance, AI, and cybersecurity, like BEL and Astra Microwave Products, are increasingly vital for modern warfare capabilities.
BT: Are you bullish on any specific defence company? What makes it stand out?
Singh: Major defence-sector company HAL is poised to benefit from potential Tejas LCA exports to countries such as Argentina, Egypt, and others. BDL, a key exporter of the BrahMos missile (via a joint venture with Russia), Akash missile systems, and anti-tank guided missiles (ATGMs), is also well-positioned. Southeast Asia and the Middle East remain active markets for defence supplies. BEL is witnessing strong demand from Africa, Southeast Asia, and Latin America for its radars, communication systems, and electronic warfare solutions.
Several private players, including L&T Defence, Bharat Forge, Solar Industries, and Data Patterns, stand to gain from exports of modular systems, artillery, drones, and subsystems.
BT: What impact do recent policy initiatives like ‘Make in India’ and increased FDI limits have on the sector?
Singh: The recent policy initiatives such as ‘Make in India’ had a transformative impact on the Indian defence sector by fostering indigenisation, encouraging private sector participation. Additionally, increased FDI limits to 74% under the automatic route have improved global investor sentiments. On the regulatory front, several structural tailwinds support the defence sector’s evolution. These include a government-backed diplomatic push through defence attachés, simplified export regulations and offset relaxations and the licensing of indigenous DRDO technologies to private players. All these initiatives position India not only as a large defence consumer, but as an emerging global manufacturing and export hub in the defence sector.
BT: Do you expect more defence exports from Indian firms? Which players could benefit most?
Singh: Domestic defence-sector companies are poised to significantly increase their defence exports. The Indian government has also launched the Atmanirbhar Bharat initiative, aiming to achieve Rs 35,000 crore in annual defence exports by 2025. Major defence-sector company HAL is set to benefit from potential Tejas LCA exports to countries such as Argentina, Egypt, and others. BDL, a key exporter of the BrahMos missile (via a joint venture with Russia), Akash missile systems, and anti-tank guided missiles (ATGMs), is also well-positioned. Southeast Asia and the Middle East remain active prospects for defence supplies.
BT: What are the key risks or challenges Indian defence companies face—technological, regulatory, or geopolitical?
Singh: Indian defence companies’ dependence on foreign technology for critical platforms like jet engines, advanced sensors, and avionics hampers self-reliance. Indigenous R&D often suffers from delays, cost overruns, and limited scale. Gaps in innovation capacity, especially in areas like AI, hypersonic, and EW systems, limit global competitiveness. On the regulatory front, procurement under the Defence Acquisition Procedure remains complex and time-consuming. Delays in contract approvals and lack of clarity in offsets also impact order visibility and planning. Global supply disruptions, especially in semiconductors and specialty materials, further complicate production cycles.
BT: What could be the next big triggers for the re-rating of the defence sector stocks?
Singh: The re-rating of defence sector stocks in India is typically driven by a combination of macro-level policy shifts, large-scale order inflows, and geopolitical developments. Considering rising global security concerns and regional tensions, the Indian government has placed a heightened emphasis on strengthening its defence capabilities. This is reflected in the consistently progressive stance of the defence budget, which has seen steady year-on-year increases. Given this trend, it is highly probable that the upcoming Union Budget will feature a further rise in defence allocations, particularly towards capital expenditure and indigenisation initiatives. Such a development would serve as a key trigger for a potential re-rating of defence sector stocks.
All eyes are turned to defence-related stocks amid the ongoing tensions between India and Pakistan. Data shows select stocks from the sector have already delivered superlative returns to investors in the past 1 year till May 13, 2025.
With a rally of 107%, Krishna Defence and Allied Industries emerged as the top gainer in the sector. It was followed by Paras Defence and Space Technologies (up 104%), Bharat Dynamics (up 91%), and Zen Technologies (up 67%).
So, what to expect from the defence sector going ahead? In an interaction with Business Today, Ravi Singh, SVP-Retail Research, Religare Broking, shared his insights:
BT: What is your take on the country’s defence sector in the context of continued Indo-Pak tensions?
Singh: India’s defence sector is strategically vital, and ongoing Indo-Pak tensions continue to drive its modernisation and growth. Persistent border conflicts, terrorism concerns, and security challenges in Kashmir have reinforced the need for high military preparedness. The government’s push for self-reliance under the Atmanirbhar Bharat initiative has further boosted domestic manufacturing, limiting imports and encouraging private-sector participation. Defence PSUs and private firms are benefiting from long-term procurement plans and growing export opportunities. The sector’s focus on innovation, self-reliance, and global partnerships aims to strengthen national security and position India as a future global military power.
BT: The sector has witnessed robust earnings growth in the past 10 years. How do you see the trend going ahead?
Singh: The earnings growth outlook for Indian defence companies remains robust, driven by supportive government policies, rising geopolitical tensions, and a sustained push for indigenisation. With the Indian government placing increased emphasis on national security and self-reliance, the defence sector is experiencing consistent budgetary support—particularly in capital expenditure. This trend is expected to continue in the upcoming Union Budget, further strengthening domestic manufacturing and procurement pipelines. Policy initiatives like ‘Atmanirbhar Bharat’ are accelerating large-scale order inflows and encouraging greater participation from the private sector. As a result, defence firms are gaining revenue visibility and expanding their production capabilities. Additionally, growing export potential and strategic collaborations with global players are enhancing the sector’s long-term growth prospects.
BT: Which categories of defence players (e.g. PSU, private, electronics, manufacturing) do you expect to remain in the limelight, and why?
Singh: India’s defence sector will continue to spotlight Public Sector Undertakings (PSUs) like Hindustan Aeronautics (HAL), Bharat Electronics (BEL), and Bharat Dynamics (BDL) for their critical role in manufacturing key platforms such as fighter jets, missiles, and naval vessels, backed by strong government support. Simultaneously, private sector manufacturers, including Tata Advanced Systems, Larsen & Toubro, Bharat Forge, and Adani Defence are rapidly rising due to government initiatives like ‘Make in India’ and relaxed FDI norms, enabling greater indigenous production and global partnerships. Additionally, defence electronics and technology firms specialising in radar, missile guidance, AI, and cybersecurity, like BEL and Astra Microwave Products, are increasingly vital for modern warfare capabilities.
BT: Are you bullish on any specific defence company? What makes it stand out?
Singh: Major defence-sector company HAL is poised to benefit from potential Tejas LCA exports to countries such as Argentina, Egypt, and others. BDL, a key exporter of the BrahMos missile (via a joint venture with Russia), Akash missile systems, and anti-tank guided missiles (ATGMs), is also well-positioned. Southeast Asia and the Middle East remain active markets for defence supplies. BEL is witnessing strong demand from Africa, Southeast Asia, and Latin America for its radars, communication systems, and electronic warfare solutions.
Several private players, including L&T Defence, Bharat Forge, Solar Industries, and Data Patterns, stand to gain from exports of modular systems, artillery, drones, and subsystems.
BT: What impact do recent policy initiatives like ‘Make in India’ and increased FDI limits have on the sector?
Singh: The recent policy initiatives such as ‘Make in India’ had a transformative impact on the Indian defence sector by fostering indigenisation, encouraging private sector participation. Additionally, increased FDI limits to 74% under the automatic route have improved global investor sentiments. On the regulatory front, several structural tailwinds support the defence sector’s evolution. These include a government-backed diplomatic push through defence attachés, simplified export regulations and offset relaxations and the licensing of indigenous DRDO technologies to private players. All these initiatives position India not only as a large defence consumer, but as an emerging global manufacturing and export hub in the defence sector.
BT: Do you expect more defence exports from Indian firms? Which players could benefit most?
Singh: Domestic defence-sector companies are poised to significantly increase their defence exports. The Indian government has also launched the Atmanirbhar Bharat initiative, aiming to achieve Rs 35,000 crore in annual defence exports by 2025. Major defence-sector company HAL is set to benefit from potential Tejas LCA exports to countries such as Argentina, Egypt, and others. BDL, a key exporter of the BrahMos missile (via a joint venture with Russia), Akash missile systems, and anti-tank guided missiles (ATGMs), is also well-positioned. Southeast Asia and the Middle East remain active prospects for defence supplies.
BT: What are the key risks or challenges Indian defence companies face—technological, regulatory, or geopolitical?
Singh: Indian defence companies’ dependence on foreign technology for critical platforms like jet engines, advanced sensors, and avionics hampers self-reliance. Indigenous R&D often suffers from delays, cost overruns, and limited scale. Gaps in innovation capacity, especially in areas like AI, hypersonic, and EW systems, limit global competitiveness. On the regulatory front, procurement under the Defence Acquisition Procedure remains complex and time-consuming. Delays in contract approvals and lack of clarity in offsets also impact order visibility and planning. Global supply disruptions, especially in semiconductors and specialty materials, further complicate production cycles.
BT: What could be the next big triggers for the re-rating of the defence sector stocks?
Singh: The re-rating of defence sector stocks in India is typically driven by a combination of macro-level policy shifts, large-scale order inflows, and geopolitical developments. Considering rising global security concerns and regional tensions, the Indian government has placed a heightened emphasis on strengthening its defence capabilities. This is reflected in the consistently progressive stance of the defence budget, which has seen steady year-on-year increases. Given this trend, it is highly probable that the upcoming Union Budget will feature a further rise in defence allocations, particularly towards capital expenditure and indigenisation initiatives. Such a development would serve as a key trigger for a potential re-rating of defence sector stocks.