Defence Stocks Outperform as HAL, BDL, BEL Gain Up to 3% in Weak Market

On June 13, 2025, defence stocks emerged as rare outperformers on the National Stock Exchange (NSE), with major players such as Hindustan Aeronautics Ltd (HAL) (2.08%), Bharat Dynamics Ltd  (BDL) (2.57%), and Bharat Electronics Ltd (BEL) (2.14%) advancing up to 3% during intraday trade. This rally stood out against a backdrop of broader market weakness, with the Nifty 50 index declining by 0.80% while the Nifty India Defence index gained  166.85 points or 1.93% whereas the Index is currently trading at 24,682.95, declining by 208.85 points or -0.84%, making it the only sectoral index in positive territory at 11:40 AM.

Catalysts: Geopolitical Tensions and Robust Order Pipelines

The immediate trigger for the rally in defence stocks was heightened geopolitical tensions in the Middle East, notably between Israel and Iran. Such developments have historically led to increased investor interest in defence counters, as global uncertainty tends to prompt governments to prioritise military readiness and modernisation.

Beyond short-term catalysts, the sector is underpinned by a robust order pipeline and strong domestic demand. The Defence Acquisition Council has approved procurements worth ₹8.5 trillion over FY23–25, nearly matching the approvals during the entire decade from FY12 to FY21. This surge in defence spending reflects India’s intensified focus on self-reliance and modernisation of its armed forces.

Key Stock Movers and Outlook

Hindustan Aeronautics Ltd (HAL): HAL’s order book remains among the strongest in the Indian defence industry. The company is positioned to benefit from over 300 new aircraft orders expected over the next 10-15 years, including Tejas Mk-1A, Mk-II, and the fifth-generation AMCA jets. With engine supply constraints easing, HAL’s execution capacity is set to improve, bolstering its revenue outlook.

Bharat Electronics Ltd (BEL): BEL is transitioning from a product manufacturer to a system integrator, particularly in missile systems such as QRSAM and MRSAM. The company is targeting large orders and ramping up its R&D and capex, aiming to maintain EBITDA margins at about 27%.

Bharat Dynamics Ltd (BDL): BDL continues to benefit from increased orders for missile systems and other defence equipment, as India accelerates its indigenous production and modernisation initiatives.

Other notable gainers included Astra Microwave Products, Zen Technologies, Paras Defence and Space Technologies, Unimech Aerospace and Manufacturing, and DCX Systems, all of which posted gains between 1% and 3%.

Sectoral Momentum and Investor Sentiment

The Nifty India Defence Index has delivered a standout performance in 2025, increasing around 28.3% year-to-date, far outpacing the Nifty 50’s 1.56% gain over the same period. Over the past three months alone, the Defence Index has risen 61.67%, reflecting strong momentum and heightened investor interest.

However, some analysts caution that many defence stocks appear overbought at current levels. According to Nilesh Jain, Head of Research at Centrum Broking, “The risk-reward is not favourable at current levels, so chasing momentum is not advisable.” He suggests investors wait for a meaningful correction before entering these stocks, while existing holders may consider riding the momentum further.

Strategic Importance and Long-Term Growth Drivers

India’s defence sector is at an inflexion point, driven by large-scale order finalisations, capacity expansion, and increasing private sector involvement. HAL, BEL, and BDL are expected to be major beneficiaries of upcoming contracts for Tejas Mk-1A aircraft, Scorpene submarines, QRSAM missile systems, and advanced light helicopters.

The government’s push for indigenisation and export promotion is further strengthening the sector’s outlook, with companies investing in infrastructure and innovation to meet growing demand both domestically and internationally.

Conclusion

Defence stocks continue to command investor attention, buoyed by geopolitical tensions, robust order pipelines, and strong government support. While the short-term rally may prompt caution among some market participants, the sector’s long-term growth prospects remain compelling, underpinned by India’s commitment to defence self-reliance and modernisation.

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