Indian defense stocks up by 5% today: What's the reason?
What's the story
Ahead of the Union Budget 2026 today, shares of several defense companies have witnessed a significant rally. The rise is driven by expectations of a higher capital outlay for the sector. Stocks such as Bharat Electronics (BEL), Hindustan Aeronautics (HAL), Garden Reach Shipbuilders & Engineers (GRSE), Mazagon Dock, and Bharat Dynamics have all seen gains of up to 5%.
Market trends
Nifty India Defence Index hits a high
The defense sector has been performing well, with the Nifty India Defence Index hitting an intraday high of 8,193.50 on Friday. The index jumped over 1.5% and has gained more than 21% since the last Union Budget. This performance is in line with the trend seen in the previous fiscal year when a record ₹6.81 lakh crore was allocated to defense, a 9.5% increase from the previous year's allocation.
Expenditure growth
Defense expenditure has increased significantly since 2020
India's defense expenditure has increased by over 40% since 2020, with an average annual growth rate of about 9.2% over the last five years. The capital expenditure on defense also saw a massive jump of 57% between April and November last year, against a budgeted increase of just 13%. This is in line with the government's push for indigenization and modernization in the sector.
Future projections
Brokerage firms predict higher defense spending
Brokerage firm Emkay has predicted that recent geopolitical developments may leave the government with little room to maneuver, thus necessitating higher defense spending. They expect defense expenditure to grow by 12% to 13% year-on-year over the next three-four years. Nuvama Institutional Equities also expects this year's Budget to increase spending in the sector.