Defence stocks rally ahead of Budget 2025, poised for strong growth
Defence stocks rally ahead of Budget 2025 as investors bet on higher allocations. HAL, BDL, Data Patterns, and Paras Defence surge up to 5%, driven by strong expectations for sectoral growth and modernization.
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Defence stocks witnessed a strong rally ahead of the Union Budget 2025, with key players like Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL), Bharat Dynamics Ltd (BDL), Data Patterns, and Paras Defence gaining between 3-5 per cent. The surge reflects heightened investor confidence in the sector, anticipating increased budgetary allocations and policy incentives to drive self-reliance and modernisation.
Steady growth in defence expenditure
India’s defence budget has maintained a robust trajectory, growing at a compound annual growth rate (CAGR) of 8.1 per cent over the past decade. From Rs 2.85 lakh crore in 2014-15, it has expanded to Rs 6.22 lakh crore in 2024-25. This growth underscores the government's commitment to strengthening national security and boosting indigenous manufacturing capabilities under the Atmanirbhar Bharat initiative.
Key Expectations from Budget 2025
Market participants expect the government to prioritise capital expenditure, research and development, and defence technology advancements in Budget 2025. The focus is likely to remain on emerging areas such as unmanned aerial systems (UAS), cyber defence, space technology, and next-gen warfare solutions. A well-structured allocation could unlock fresh opportunities for domestic players and enhance India’s competitiveness in the global defence market.
Private sector to gain from policy push
A stronger push towards indigenisation and private sector participation is expected, aligning with initiatives such as the Make in India and Defence Production and Export Promotion Policy (DPEPP). Companies engaged in defence electronics, missile systems, and aerospace engineering could benefit significantly from production-linked incentives (PLI) and favourable policy amendments.
India’s growing global defence footprint
India’s defence exports have seen consistent growth, supported by a clear vision of reducing import dependency. The upcoming budget is expected to strengthen this momentum by providing incentives for domestic firms to scale up production and explore new international markets. With an order pipeline exceeding Rs 1 lakh crore across key players, the sector is well-positioned for long-term expansion.
Investor sentiment remains strong
The pre-budget rally in defence stocks signals bullish sentiment, with analysts predicting further upside if the government announces significant reforms. While the sector’s share in GDP has declined from 2.4 per cent in 2020-21 to 1.9 per cent in 2024-25, a renewed policy thrust in Budget 2025 could reignite strong growth and investment inflows into India’s defence and aerospace industries.
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