Defence Stocks

The defence stocks represent companies involved in the manufacturing of defence equipment such as machines, tools, vehicles, weapons, and technologies used by a country’s military to ensure national security and execute defence operations. These companies supply defence equipment and technology, significantly contributing to the security of the country.

Best Defence Stocks in India

The defence sector of India has seen strong investor interest in the past few years, amid rising government focus on self-reliance and military modernisation. Here is a list of the top defence stocks in India, based on their market capitalisation.

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Defence

Discover companies involved in the manufacturing, development, and supply of defense-related products and services, including military equipment, aerospace, and security systems.

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Things to Know Before Investing in Defence Stocks

Government Contracts: Look for companies with a strong track record of securing high-value government contracts to ensure stable revenue and long-term growth.

Global Geopolitical Stability: The defence sector is closely related to international security. Increasing border conflicts and regional tensions can lead to defence spending and new contracts.

Diversification: Invest in companies operating across various defence sub-sectors such as aerospace, weapons systems, technology, etc., to mitigate risk. Read more about the importance of diversification here.

Financial Health: Evaluate a company's financial stability via a strong balance sheet, consistent profits, and manageable debt levels etc.

Innovation: Companies that actively invest in advanced technologies such as drones, cybersecurity, and AI can be positioned for future growth.

Profitability: As per INDmoney research of listed defence companies, just seven companies account for approximately 95% of the defence sector's overall profits. For every ₹100 earned in profits by the sector, HAL leads with a profit of ₹41 followed by BEL (₹26) and Mazagon Dock (₹13). This highlights the significant role these established entities play.

Budget Allocation for the Defence Sector

In the Union Budget 2025-26 (presented in February 2025), India allocated ₹6,81,210 crore towards the total Defence Budget, a 6.3% increase over the revised estimates of FY2024–25, as per the Press Information Bureau, a key government agency in India.

  • Capital Expenditure: Out of the total defence budget, ₹1,80,000 crore allocated for new weapons, aircraft, naval assets, infrastructure, etc.
  • Revenue Expenditure: ₹3,11,732 crore allocated for operational expenditure such as salaries, training, fuel, repairs, and maintenance of equipment.
  • Defence Pensions: As much as ₹1,60,795 crore was set aside for the pensions of retired armed forces personnel.
  • Ministry of Defence (Civil): ₹28,683 crore was allocated to cover administrative costs of the Ministry, including organisations like the Defence Accounts Department, the Border Roads Organisation (BRO), and the Coast Guard.

Advantages of Investing in Defence Stocks

Government Support: The government actively supports the defence sector via various initiatives, including financial (budget) allocation, consistent policies, and promoting indigenous design, development and manufacturing of defence equipment.

Long-Term Contracts & Order Visibility: Companies operating in the defence sector often get long-term contracts from the government, which ensures stable revenues.

High Entry Barriers: Followed by the strong regulatory norms and national security concerns, it's hard to enter the business, so companies in the sector don’t face much competition.

Make in India Push: The government is supporting indigenous manufacturing, creating an opportunity for the defence companies to grow.

Export and Innovation Growth: Some of the defence companies in India, now also selling their products to other countries, along with investing in new technology, including drones and AI.

Future of Defence Sector in India

The defence sector of India is well-positioned for significant growth led by government support, rising domestic manufacturing, and expanding exports.

Key Growth Drivers:

  • Domestic Production: India’s defence production has surged significantly following the launch of the "Make in India" initiative and has reached a record ₹1.27 lakh crore in FY 2023-24. This marked a significant 174% growth as compared to ₹46,429 crore reported in FY 2014-15. (Source: Press Information Bureau, Govt. of India, Feb 1, 2025)
  • Export Expansion: The defence exports of India ramped up to an all-time high of ₹23,622 crore in FY 2024-25 with registering approximately 12% growth over the previous fiscal year and a 1,117% growth over exports worth ₹1,941 crore in FY 2014-15. (Source: PIB, Apr 2025)
  • Rising Defence Expenditure: The allocation of budget for the defence sector increased 6.3% to ₹6,81,210 crore for FY2025-26, as compared to revised estimates of FY2024–25. (Source: PIB, Feb 1, 2025)
  • Private Sector Participation: The private sector played a significant role in the defence sector. During FY 2024-25, the private sector contributed 21% to the total defence production in the country. (Source: PIB, Mar 29, 2025)

What are Defence Stocks?

Defence stocks are shares of companies which are involved in manufacturing weapons, military equipment, aerospace systems, and related technologies.

Why Invest in Defence stocks?

Defence stocks potentially offer stable long-term growth due to consistent government contracts, increasing defence budget, and a focus on national security.

How to Invest in Defence Stocks?

You can invest in defence stocks in India by opening a trading account with INDmoney and buying shares through the stock exchange. Alternatively, you can invest through mutual funds or exchange-traded funds (ETFs) that focus on the defence sector.

What are the Best Defence Stocks for the long term?

Identifying the best defence stocks for the long term involves evaluating factors like a company’s consistent financial performance, growing order book, technological advancements, and alignment with government defence strategies. Companies that consistently demonstrate these qualities are often favoured by long-term investors.

Top long-term defence stocks often include established companies like Hindustan Aeronautics (HAL), Bharat Electronics (BEL), and Bharat Dynamics (BDL), which have demonstrated strong results and potential for consistent performance. However, past performance does not guarantee future returns. It's crucial for investors to conduct thorough research and consider their individual risk tolerance.

What are the risks of defence stocks?

The defence companies are dependent on government orders, regulatory changes, and geopolitical tensions. Any delays or cancellations in defence contracts could lead to significant financial loss.

What factors should I consider before investing in defence stocks?

Before investing, an investor should look at the company’s order book, financial health, R&D capability, export potential, and its alignment with the government policies.

Are defence stocks considered safe investments?

Defence stocks can be stable due to government demand and support, but they are not risk-free and may face volatility due to policy changes or global tensions.

What is the impact of government policies on defence stocks?

Government policies significantly impact defence stocks. Policies that increase defence budgets, promote local manufacturing, and streamline procurement processes can positively affect these stocks. Conversely, budget cuts or restrictive policies can have a negative impact.