Best Defence Stocks in India

22 March 2024
8 min read
Best Defence Stocks in India
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(The stocks mentioned in the blog are as per Analyst Ratings and Market Capitalization)

Defence plays a vital role in protecting a country from internal and external threats, making it an essential institution. As a developing economy, India recognises the importance of upgrading its defence capabilities to become self-sufficient and modern, particularly in countering threats from neighbouring countries. The defence sector of India has witnessed a remarkable surge in stock prices as investors show strong confidence in its potential. 

In this blog, you will learn about the best defence stocks in India as per market capitalization and analyst ratings that have caught the attention of investors in 2024 due to their promising prospects. 

Defence Industry in India - A Brief Overview

The Indian defence sector plays a crucial role in enhancing national security and fostering self-reliance in defence production. India has the world's 2nd-largest army, indicating a strong defence capability to protect its borders and citizens.

This sector covers areas such as aerospace, land systems, naval systems, etc. Moreover, the defence stocks of India have expanded largely due to government support for developing and producing defence equipment.

Both public and private defence companies in India contribute to manufacturing defence equipment and supplies. The Government of India has been initiating measures to promote indigenous defence manufacturing and reduce dependency on imports. The Indian defence industry has achieved notable progress in developing advanced technologies and systems, including missile defence systems, fighter jets, submarines and unmanned aerial vehicles. 

In the Union Budget for 2023-24, the government increased the capital allocations for modernising and developing infrastructure for the Defence Services to ₹1,62,600 crores, showing a rise of 6.7% from the previous fiscal year. Furthermore, the Ministry of Defence aims to achieve a turnover of ₹1.75 lakh crore in aerospace and defence manufacturing by 2025.

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Best Defence Stocks in India 2024 as per Analyst Ratings

The table below showcases the top defence stocks in India for 2024, according to analyst ratings. We have created the list as per analyst ratings as they run a deep analysis of the stock market before rating a stock-

S.No.

Best Defence Stocks in India (as per analyst ratings)

BUY Analyst Rating (in %)

1.

Bharat Electronics

85.71

2.

HAL

80

3.

Bharat Dynamics

71.43

*Our stock selection criteria for top stocks based on analyst ratings are mentioned at the bottom of this blog.

Top Defence Stocks in India in 2024 as per Market Capitalisation

Here is a list of the best defence sector stocks in India as per market capitalisation:

S.No.

Best Defence Company Stocks in India (as per market capitalisation)

1.

HAL

2.

Bharat Electronics

3.

Mazagon Dock Shipbuilders

4.

Bharat Dynamics

5.

Cochin Shipyard

*Our stock selection criteria for top stocks based on Market Capitalisation are mentioned at the bottom of this blog.

Overview of Best Defence Stocks in India as per Analyst Ratings and Market Capitalisation

In the domain of defence shares in India, numerous key players have emerged that provide diverse options for investment. Here is a list of the top defence stocks in 2024 that are worth investing in.

1) Bharat Electronics

Established in 1954, Bharat Electronics Limited (BEL) is a Navratna Public Sector Undertaking (PSU). It manufactures specialised electronic products for the Indian Defence. The company produces a variety of defence equipment and products, including defence communication devices, electronic warfare systems, land-based radars, naval systems, C4I systems, weapon systems, avionics, etc. 

The non-defence sector of Bharat Electronics deals with various areas such as cybersecurity, e-mobility, railways, e-governance systems, homeland security, civilian radars, turnkey projects, components or devices, and telecom and broadcast systems.

BEL has subsidiaries and joint ventures with local and international companies providing a wide array of products such as electronic voting machines, radar transmitters, sonar-based tech, ballistic missile systems, etc.

2) HAL

Established in December 1940, Hindustan Aeronautics Limited (HAL) is a major aerospace and defence company based in Bangalore, India. This India-based company is involved with designing, developing, manufacturing, repairing, overhauling, upgrading and servicing various products, including aircraft, aero engines, avionics, helicopters, accessories and aerospace structures. 

The company's product lineup consists of various aircraft such as HAWK, Su-30 Mki, Light Combat Aircraft (LCA), Dornier, Intermediate Jet Trainer (IJT) and HTT-40. Additionally, it manufactures helicopters like Dhruv, Chetak, Cheetah, Lancer, Light Combat Helicopters (LCH), Cheetah and Light Utility Helicopters (LUH).

The company also offers inertial navigation systems, auto stabilisers, laser range systems, flight data recorders, radio navigation equipment, communication equipment, airborne secondary radars, etc. 

3) Bharat Dynamics

Founded on July 16th, 1970, Bharat Dynamics Limited (BDL) was established in Hyderabad, Telangana, as a PSU under the Ministry of Defence. It serves as the manufacturing base for guided missile systems and related equipment for the Indian Armed Forces. BDL operates 4 manufacturing units, with 3 situated in Telangana (Hyderabad, Bhanur and Ibrahimpatnam) and one in Andhra Pradesh (Visakhapatnam).  

Over time, BDL has emerged as one of the few companies globally equipped with advanced facilities for producing and supplying guided missiles, underwater weapons, airborne products, and other allied defence equipment for the Indian Armed Forces. Additionally, the company provides product life cycle support and refurbishment or life extension services for vintage missiles.

4) Mazagon Dock Shipbuilders

Located in Mumbai, Mazagon Dock Shipbuilders is a leading shipbuilding yard in India which was established as a private company in 1934 and came under government control in 1960.  Since then, it has constructed 802 vessels, including 28 warships ranging from advanced destroyers to missile boats and  7 submarines. The company specialises in constructing and repairing ships, submarines and other engineering products. 

In addition, MDL has also delivered other types of ships such as cargo ships, supply vessels, passenger ships, water tankers, multipurpose support vessels, tugs, dredgers, etc. for customers both in India and abroad. Moreover, MDL has fabricated and supplied jackets, main decks of wellhead platforms, jack-up rigs, etc.

5) Cochin Shipyard

Incorporated in 1972, Cochin Shipyard Limited (CSL) has become a leading player in the Indian shipbuilding and ship repair industry over the past 3 decades. This yard can construct and repair the largest vessels in India. The company is involved in constructing various types of vessels and providing repair and refitting services, including upgrades, periodic layup repairs and extending the lifespan of ships. 

Cochin Shipyard’s ship-building products include defence vessels such as aircraft carriers, hydrographic survey vessels, fast patrol vessels, offshore patrol vessels and pollution control vessels. In addition, it offers ship repair services for both defence and commercial ships, marine engineering training and various other facilities.

Factors to Consider Before Investing in Defence Stocks in India

While investing in defence stocks can bring rewards, it is crucial to keep in mind the following factors before you decide to invest:

  • Financial Performance

Analyse the financial performance of defence sector companies before investing in their stocks. Revenue growth, profitability, and debt levels can give insights into a company's financial health and potential returns.

  • Technological Advancements

Keeping track of technological advancements in the defence sector is vital. Companies that invest in research and development and stay ahead in innovation are likely to have a competitive edge in the market.

  • Government Policies 

The defence industry relies heavily on government policies and contracts. You should stay updated on any changes in regulations and monitor the awarding of defence contracts to companies.

  • International Geopolitical Environment

Changes in the worldwide geopolitical environment can affect the defence sector. You should take into account elements such as global relations, conflicts and defence partnerships, which could influence the need for defence equipment and services.

Should You Invest in Defence Stocks?

While the defence sector holds significant potential, it is essential to weigh certain factors before making investment decisions. Geopolitical risks, such as border tensions and government policy changes, influence the performance of defence stocks. Additionally, defence stocks can exhibit volatility, particularly in response to economic uncertainties. 

These stocks may seem stable, given the government's involvement in the defence sector. However, before investing you must review and analyse their fundamentals like profit margins, standard financial ratios, etc. Stay updated with market changes and regularly check if your investment choices match your financial goals and risk appetite.

The Bottom Line

Investing in the defence shares offers financial growth due to its steady demand, government backing and long-term contractual commitments. However, before investing, you must consider factors such as financial performance, technological advancements, etc.

Moreover, you can seek advice from financial experts who will help you navigate the complexities of the stock market and make well-informed investment decisions.

*Stock Selection Criteria for Top Stocks Based on Analyst Rating

Investors must carefully read through the following information on stock selection criteria while running through the stocks based on analyst ratings-

These stocks have been shortlisted as per Analyst ratings provided by the I/B/E/S (The Institutional Broker’s Estimate System) database, further aggregated by Refinitiv. Ratings are determined by analysts' forecasts of company performance, taking into account metrics like earnings per share, sales, and net income. These ratings should not be construed as investment advice/recommendations/offer/solicitation of an offer to buy/sell any securities by Groww Invest Tech Pvt. Ltd. (formerly known as Nextbillion Technology Pvt. Ltd.).

Before investing, investors must conduct independent research and not solely rely on the information provided here. This will allow investors to make appropriate investment decisions based on their financial goals, investment objectives and risk tolerance.

*Stock Selection Criteria for Top Stocks Based on Market Capitalisation

These stocks are chosen based on their market capitalization, which represents the total value of a company's outstanding shares. The selection is arranged in descending order, placing the largest companies first and the smaller ones later. This helps prioritize stocks based on their market size. 

It is important to note that market capitalization in no way guarantees a company’s performance or the returns from its stocks. However, it can be used as a criterion for shortlisting companies from within a sector. Investors should recognize that other factors, such as financial health, management efficiency, and market trends, play crucial roles in determining the actual success of an investment. 

This stock selection should not be construed as investment advice/recommendations/offer/solicitation of an offer to buy/sell any securities by Groww Invest Tech Pvt. Ltd. (formerly known as Nextbillion Technology Pvt. Ltd.).

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.

To read the RA disclaimer, please click here
Research Analyst - Aakash Baid

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Groww Invest Tech Pvt. Ltd. (Formerly known as Nextbillion Technology Pvt. Ltd) Ltd. do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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