Defence Stocks Rally up to 7% as PM Modi Pushes for 'Made in India' Military Equipment

resr 5paisa Research Team

Last Updated: 13th May 2025 - 03:58 pm

2 min read

Shares of central Indian defence PSUs like Bharat Dynamics Ltd (BDL), Bharat Electronics Ltd (BEL), and Hindustan Aeronautics Ltd (HAL) saw a massive swell in intraday trading on Tuesday to a high of 7%. This peak came following PM Narendra Modi's decision to boost the growth of India's defence sector, which aligned with the self-reliant India (Aatmanirbhar Bharat) action he brought to the nation.

While addressing a defence expo in Pune on Monday evening, the PM reiterated the government's push to curb reliance on challenged military hardware and called for more investment in military hardware made in India. "India cannot rely on weapons made in another country. The focus must be on building, innovating, and using indigenous defence systems. 'Make in India' is not just a slogan; it is imperative," Prime Minister Modi stated.

Market Reaction

Investors quickly reacted to the news, expecting increased order flows and extra policy support for domestic defence companies. HAL shares increased nearly 6.8% on the NSE, reaching a new 52-week high; BEL was up about 6.1%; and BDL was higher by almost 5.7%. Other defence-linked stocks like Cochin Shipyard, Mazagon Dock Shipbuilders, and Garden Reach Shipbuilders are all better, reflecting general optimism in the defence market.

Defence indices outperformed broader benchmarks. The Nifty Defence index rose nearly 5%, outpacing the Nifty 50’s modest 0.3% gain.

Policy Tailwinds and Order Book Boosts

The latest push comes as the Indian Ministry of Defence releases multiple ‘positive indigenisation lists’, catalogues of equipment that will no longer be imported. These efforts, rising geopolitical tensions, and a growing defence budget have bolstered confidence in Indian PSUs' long-term prospects.

Hindustan Aeronautics, India's largest airship manufacturer, is ramping up production of Tejas Light Combat Aircraft and Advanced Light Helicopters, which will form critical components of the Indian forces' future inventory.

BEL, a major provider of radar and communication systems, entered into several agreements to supply export orders. BDL, a missile producer, is achieving the Indian Army's and Air Force's large contract programmes.

Analyst Views

Market analysts believe this rally reflects both sentiment and fundamentals. “Defence sector stocks are not just reacting to political headlines; they are supported by robust order books, improving margins, and clear policy visibility,” said one analyst. “We expect sustained upside for companies with proven manufacturing capabilities and established relationships with the Indian Armed Forces.”

Foreign institutional investors (FIIs), who have historically been underweight on defence PSUs, also show renewed interest in the sector amid India's increasing strategic autonomy and emphasis on national security.

Looking Ahead

With India planning to have a defence manufacturing industry worth US$25 billion by 2025, including exports worth US$5 billion, the domestic industry stands at a critical inflection point. Government incentives in the form of Production-Linked Incentives (PLI) initiatives, tax incentives, and procurement requirements could give the growth a further boost.

Simultaneously, international instability across the Indo-Pacific to Eastern Europe is reviving the imperative for nations to secure dependable supply chains and strengthen their defence industry bases. For India, this translates to doubling down on the ‘Make in India’ philosophy, not only an economic mantra but the foundation of national security.

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