Defence stocks: BEL top pick, HAL offers limited downside, says Nuvama

Nuvama Institutional on Tuesday said it remains structurally positive on defence electronics with a focus on players with indigenised tech and Intellectual Property (IP), with low import dependability. Bharat Electronics Ltd (BEL) remains its top pick with near-term upside contingent on QRSAM project. Nuvama prefers Data Patterns (India) Ltd and Solar Industries India Ltd (SOIL) for stronger medium-term growth. Hindustan Aeronautics Ltd (HAL), it said, offers limited downside with upside on execution recovery. It suggested 'Buy' on a total five defence stocks.

The brokerage attended Defence Conclave 2026. It said the key themes were drones, AI and directed energy weapons redefining the battlefield. The Conclave also focused on co-development with foreign OEMs, deep-tech manufacturing and academia-industry collaboration are key levers.

The conclave highlighted the growing role of technology as the spectrum of modern warfare now spans land, sea, air, space and cyber. Capabilities such as drone swarms, artificial intelligence, satellite surveillance, electronic warfare and Directed Energy Weapons (DEWs) are reshaping battlefields, underscoring the need for India to beef up domestic technological capabilities, Nuvama said.

The brokerage suggested a target of Rs 525 on BEL, Rs 15,800 on Solar Industries India, Rs 1,900 on Bharat Dynamics Ltd (BDL), Rs 4,800 on HAL and Rs 3,570 on Data Patterns.

India’s defence ecosystem is steadily transitioning towards greater indigenous capability with 65 per cent of defence equipment now manufactured domestically, marking a notable reversal from earlier 65–70 per cent import dependence, Nuvama said.

"Programmes such as Akash, BrahMos, indigenous radar and EW systems illustrate this shift, supported by government initiatives under Aatmanirbhar Bharat. The defence budget has risen from Rs 2 lakh crore in 2013 to Rs 7 lakh crore currently while defence exports are targeted to reach $6 billion by 2029. Emerging global opportunity areas include drones, counter-drone systems, AI-led warfare capabilities and defence space technologies," it noted.

Nuvama said while India must continue beefing up domestic R&D and manufacturing capabilities, critical gaps persist across sensors, semiconductors and electronic modules, where dependence on global supply chains stays high, further limited by technology controls under regimes such as ITAR and MTCR.

Hence, co-development partnerships with global defence players (with BrahMos as benchmark model) shall remain essential, complemented by deeper integration of private industry, startups and academia, it cited speakers as saying.