In India, the defence sector covers a wide range of domains, including naval, land, and aerospace areas. Working within these domains are various companies in the public and private sectors responsible for manufacturing and delivering defence equipment and machinery. In recent years, the defence sector has experienced rapid growth, making it an increasingly attractive option for investment. This article will explore the benefits of investing in defence stocks and highlight some of the most popular defence stocks in India.
There are a number of reasons why investment in defence stocks may be the right option for you:
Defence budgets in many countries, including India, have been on the rise due to increasing geopolitical tensions and the need for modernised military capabilities. This increased spending creates opportunities for defence firms to expand, potentially leading to significant financial growth and profitability for investors in defence stocks.
Investing in defence is considered evergreen, as the need for defence forces will always exist. This sector's enduring relevance makes it a relatively secure investment option, with potential for long-term growth.
Many defence companies secure long-term contracts with the government, providing regular profits and a steady cash flow. These contracts offer financial stability and reliable returns for investors.
Investing in defence stocks provides unique diversification, as the sector often performs differently from others like consumer goods or technology. This balance can reduce portfolio risk, especially during economic downturns or market volatility.
Here are some of the top defence stocks in India.
Hindustan Aeronautics Ltd., or HAL, based in Bangalore and established in 1940, is one of the biggest companies in the defence sector. HAL is involved in developing, designing and upgrading products such as aircraft, engines, and other structures in the aerospace field. Over a 5-year period, the stock’s CAGR is 21.31%.
Bharat Electronics Pvt. Ltd. (BEL) is primarily involved in manufacturing specialised electronic products for the Indian Armed Forces. Established as a Public Sector Undertaking (or PSU) in 1954, it has several subsidiaries and joint ventures with domestic and international companies. The CAGR for this stock is 52% over a 5 year period.
Bharat Earth Movers Limited (BEML) is a PSU under the Ministry of Defence. It manufactures construction equipment, coaches, and military equipment such as tanks and missiles. Over 5 years, the CAGR for this stock is 44%.
While there is an endless need for the defence sector, making it a secure investment for the long term, it is important to keep in mind certain points before buying defence stocks. These include government policies, geopolitical issues, and technological advancements, which cause stock values to fluctuate.
You can invest in the Indian defence sector stocks through direct equity investments. You can also subscribe to small case baskets that focus on the defence sector.
If you are not a fan of stocks, check for Defence-focused Mutual Funds or ETFs (if available) or diversified thematic funds that include defence stocks.
You must research company fundamentals, government contracts, and sector outlook before investing.
Valuing defence stocks involves a mix of traditional and sector-specific metrics. You must check for the Order Book Size, government contracts.
Look at the fundamentals, its financial ratios, such as EBIDTA margins, ROCE, P/B, and P/E. Check if the company is investing in research, development, and innovation, too.
Don’t forget, company annual reports, investor presentations can also help you assess value.
Defence stocks in India are gaining momentum due to several structural and policy-driven factors.
These changes have improved investor sentiment, creating long-term growth opportunities for the defence sector.
Yes, many listed Indian defence companies offer dividends periodically. Bharat Electronics (BEL), Hindustan Aeronautics (HAL), and Mazagon Dock Shipbuilders (MDL) are some companies that have declared dividends in recent years as they grew. Dividend returns vary based on the company's profits.
Yes, there are a few small-cap or penny stocks in the defence and allied sectors. However, you must be cautious. Some examples include Zen Technologies, Premier Explosives.
While these stocks may offer high return potential, they are highly volatile, have limited liquidity, and company-specific risks. You must analyze fundamentals thoroughly before investing. Avoid investing based on speculations or news.
Yes, defence stocks can be good long-term investments, especially given the sector’s strategic importance and government support.
Large-cap companies like HAL and BEL have delivered multi-year returns. However, your long-term success depends on choosing strong companies with steady order inflows and timely execution.
Investing in defence stocks also has certain risks. It relies heavily on government orders, which means any policy changes or delays could affect revenues. Global disruptions or tariffs may affect export contracts and supply chains. Rapid stock surges could lead to overvaluation.
Remember, diversify. Don’t allocate a large portion of your portfolio to this theme alone.
You can monitor defence stock performance through the NSE/BSE websites, broker platforms, or even a screener. Check the company websites for quarterly earnings, order wins, and investor presentations. Follow updates from the MoD (Ministry of Defence), press releases, and budget allocations.
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09 July 2025
3 mins read
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