BEL, HAL, BDL, GRSE, MTAR Tech, Astra Microwave: Why defence stocks are falling today

A total of 23 of 26 defence stocks dropped in Wednesday's trade, extending recent slump, despite expectations of higher capex allocation to the sector in the forthcoming Budget 2026. Analysts said while a strong capex push in defence is expected, these positives are not yet strong enough to counter market concerns over geopolitical issues. 

Among key defence stocks, Bharat Electronics Ltd (BEL) fell 2.26 per cent to Rs 399.75 on BSE. Bharat Dynamics Ltd (BDL) declined 2.06 per cent at Rs 1,421.90. Hindustan Aeronautics Ltd (HAL) dropped 1.43 per cent to Rs 4,289.25. MTAR Tech slipped 2.52 per cent to Rs 2,455.45.
Garden Reach Shipbuilders & Engineers Ltd, Mazagon Dock Shipbuilders Ltd, and Cochin Shipyard, among others, fell each. Zen Technologies fell 2.38 per cent, Astra Microwave Products Ltd 2.26 per cent, DCX India 2.17 per cent and Avantel 2 per cent. Idea Forge fell 1 per cent. Paras Defence was flat. Mishra Dhatu Nigam Ltd declined 1.63 per cent to Rs 340.40. 

Why defence stocks are falling today? 

"Ahead of the Union Budget on February 1, expectations of a capex push in railways, defence and consumption support remain constructive, but these positives are not yet strong enough to counter the prevailing global uncertainty," said Ponmudi R, CEO of Enrich Money. 

Against the market expectations of double-digit growth, Nuvama said it sees defence capex to grow at 8 per cent YoY with higher allocation towards R&D, UAV/drones, anti-drone systems etc. Incremental budget will be sought in the backdrop of Operation Sindoor as well as some key large programmes in pipeline are likely to materialise, skewed towards Air Force and Navy, it said.

Union Budget 2026 expectations for defence sector 

DBS Bank's Radhika Rao sees a double-digit increase in the FY27 Budget. An uncertain geopolitical environment also increases the urgency of boosting domestic procurement and strengthening the security apparatus, she said.

Nomura said allocation to the defence sector in the FY27 Budget could rise in the high single-digit to 20 per cent range. The brokerage said it viewed capital outlay for domestic procurement, modernisation and research and development as a key focus area.

Motilal Oswal Financial Services said defence and allied industries are expected to receive greater attention, building on recent momentum in start-ups and the Centre’s formation of a dedicated committee to nurture allied defence capabilities.

MOFSL said central government capital expenditure for FY27 is estimated at Rs 12.4 lakh crore, up 10.3 per cent. Of this, it said defence spending is projected to increase 15 per cent over the estimated Rs 1.8 lakh crore expenditure in FY26.

The Defence Acquisition Council approved capital acquisition proposals worth Rs 79,000 crore in its winter session, taking total FY26 approvals to Rs 3.3 lakh crore. There was also a one-time emergency procurement of Rs 40,000 crore during FY26.

UBS said it expected budgeted defence expenditure to pick up in line with strong Defence Acquisition Council approvals over the past two years.

BMI, a unit of Fitch Solutions, said India’s external environment had created new spending requirements. It noted that the country had engaged in armed conflict with the People’s Republic of China and Pakistan over the past five years. At the same time, defence spending as a share of central government expenditure had stagnated after declining sharply during 2018 to 2020.

“China’s elevated defence spending levels, along with Pakistan’s recent decision to increase its defence budget, mean New Delhi must consider higher security spending in FY2026 to FY2027,” BMI said.