Budget 2026 expectations for defence sector: BEL, Mazagon Dock, HAL, BDL shares in focus

Defence sector is likely to be among key beneficiaries of Budget 2026, with analysts anticipating defence capex to jump up to 20 per cent, benefitting stocks such Bharat Electronics Ltd (BEL), Mazagon Dock Shipbuilding Ltd, Hindustan Aeronautics (HAL), Bharat Dynamics (BDL), Astra Microwave Products Ltd, Data Patterns (India) Ltd and Paras Defence and Space Technologies Ltd, among others. 

The focus areas are likely to be missiles and ammunition, UAVs and counter-UAV systems, electronic warfare, air defence, network-centric systems, and technology-driven force-multiplier equipment.

Emkay Global said any increased focus on aerial warfare will be positive for Zen Technologies Ltd, Astra Microwave Products Ltd, Data Patterns (India) Ltd and Paras Defence and Space Technologies Ltd. For this, the domestic brokerage sees a Rs 10,000 crore incentive programme. "The government is expected to launch the Drone Shakti Mission, featuring a 5-year, Rs 10,000 crore incentive program to position India as a global manufacturing hub," it said.

This brokerage noted that the government has already approved a Rs 69,800 crore package to focus on shipbuilding. Budget 2026–27, it believes, presents an opportunity for further momentum. "The first requirement is long-term, low-cost financing for ports and shipbuilding, scale-up support for the maritime ecosystem through an expanded Sagarmala 2.0 program for driving port modernization, inland waterways, shipbuilding, repair, and coastal development over the next decade, complementing existing maritime sector package," it said.

It sees Cochin Shipyard, Mazagaon Dock and Larsen & Toubro (L&T) as key beneficiaries of any such move. 

Nomura India sees high single-digit to 20 per cent increase in defence budget. It sees a larger capital outlay for domestic procurement, modernisation and R&D. 

MOFSL said defense capital outlay is expected to remain on a high trajectory. It noted that defence has been one of the largest contributors to recent capex growth, supporting continued focus on indigenisation of major platforms and defense electronics and expanding opportunities for private-sector participation.

"Higher allocation for defense capex would be positive for all the defense companies like Bharat Electronics, Bharat Dynamics, and Hindustan Aeronautics, among DPSUs. The budget should aim to cut the compliance burden and speed up approvals for manufacturing and defense projects, as these are major constraints on private capex," it said.

Axis Securities likes BEL & MTAR Tech as top defence plays ahead of Budget 2026. 

Nirmal Bang Institutional Equities said following the Rs 6.8 lakh crore defence budget in FY26 (up 9.5 per cent YoY), the upcoming budget is expected to see a 10-15 per cent YoY increase. Some estimates, it noted, suggest defence spending could gradually edge closer to 2 per cent of GDP, supporting long-term modernisation and capability enhancement amid heightened border and geopolitical tensions.

"We expect capital allocation to increase to Rs.2.1–2.3 lakh crore, implying a 20–30 per cent YoY growth, with the share potentially moving closer to 30 per cent of total spending," it said.