Will defence stocks mirror the IT boom and create millionaires like in the 1990s? Analysts say this

India’s defence sector has been on a notable upward trajectory, prompting analysts and investors to ask whether defence stocks could replicate the spectacular growth seen in the IT sector during the 1990s. Over the past year, the Nifty India Defence Index delivered returns of roughly 20%, led by Garden Reach Shipbuilder’s 41% gain. Other top performers include Mazagon Dock and Bharat Electronics, both up 38%, and Bharat Dynamics, which rose 31%.

CA Nitin Kaushik highlighted on social media platform X that defence stocks are exhibiting patterns strikingly similar to the early IT boom. “For nearly 20–30 years, defence in India moved at a snail’s pace,” he noted. “But in the last 3–5 years, exports, outsourcing, and indigenous production have skyrocketed. India’s defence exports touched Rs 21,000 crore in FY24—a tenfold growth in just seven years.”

Geopolitics as a growth catalyst

Kaushik emphasized that global geopolitical dynamics are a key driver of this surge. “The US, G7, NATO, and BRICS+ are all racing to strengthen military dominance. Defence is not just about war; it’s about trade security, resource control, and power balance. India, with its geography and talent pool, is emerging as a global supplier,” he said.

He also pointed out that internal stability matters. A strong defence ensures secure borders, which in turn fosters economic confidence. “Next-generation weapons are not just about muscle; they involve chips, codes, and AI,” Kaushik added, citing drones, unmanned vehicles, cyber defence systems, and smart surveillance as areas where India’s IT and manufacturing base provide a unique edge.

Sunrise sector

The defence sector is increasingly being dubbed the “sector of the decade” in India. Analysts point to multiple growth drivers: rising government expenditure, strong export momentum, the entry of private players, and technology infusion into hardware.

For FY25, the Indian government allocated Rs 6.2 lakh crore to defence, with plans to increase capital expenditure by 17–18% in FY26, according to Defence Secretary Rajesh Kumar Singh. The ministry is targeting an annual capex of $25–30 billion, aimed at modernizing the armed forces and accelerating indigenisation. Notably, a Rs 30,000 crore procurement for MALE drones is on the horizon, with further orders for advanced drones and AWACS systems likely to total Rs 75,000 crore in the same fiscal year.

Could defence create millionaires?

Kaushik drew parallels to the 1990s IT revolution, suggesting defence could emerge as a similar wealth-creating engine by the 2030s. “Patience, policy support, and global demand are the recipe for wealth creation. This is about economics, geopolitics, and technology dominance. For investors, it’s not a hype story, but a structural megatrend,” he said.

A Crisil report highlights a strong growth trajectory for India’s private defence sector, boosting the ‘Make in India’ initiative. Private defence companies are expected to see 16-18% revenue growth this fiscal, driven by rising domestic demand and government-backed policies encouraging local manufacturing. Between FY22 and FY25, the sector recorded a 20% CAGR, with stable operating margins of 18-19%. The order book is projected to rise from Rs 40,000 crore in FY25 to Rs 55,000 crore by FY26, supported by segments like electronic warfare, aerospace, and C4I systems. Equity infusions have strengthened balance sheets, enabling R&D and capital expenditure to secure larger contracts.

While the sector still faces challenges, including supply chain complexities and policy execution risks, the combination of government backing, private sector participation, and global demand makes defence a compelling play. With returns already outperforming broader indices, many investors are beginning to take note.