India's Rs 130,000 crore defence play: Why BEL and Data Patterns are Nuvama's top picks?

In a world increasingly shaped by geopolitical tensions, India is taking bold strides to bolster its defence sector. With an estimated Rs 130,000 crore in defence spending over the next five years, the country aims to fortify its position amid global uncertainties.

Domestic brokerage Nuvama Institutional Equities has identified Bharat Electronics Limited (BEL) and Data Patterns (India) as top picks in this evolving sector.

Why focus on defence?

India’s defence spending has grown at an average rate of 8 per cent over three decades, reflecting a long-term commitment to modernisation and self-reliance. From sub-systems supplier to turnkey solution provider, India is climbing the global defence value chain.

The government's "Make in India" push, aimed at reducing dependence on global supply chains, has gained urgency amid disruptions in Europe and East Asia. Over fifty per cent of India’s defence imports still come from Russia, followed by France, Israel, and South Korea. Analysts believe this localisation drive will unlock vast opportunities for private players, driving robust growth in the sector.

Strong performance on the bourses

BEL and Data Patterns have already delivered impressive returns. On a year-to-date basis, BEL surged 59 per cent, while Data Patterns gained 35 per cent, far outpacing the Sensex and Nifty, which rose nine per cent and eight per cent, respectively.

Outlook for 2025

Major defence programmes like QRSAM, LCA Mark 1A, P-75I submarines, and Pinaka missile systems are expected to secure large orders by the second half of FY25. Analysts anticipate the Air Force and Navy to drive this growth.

With Rs 50,000 crore in export targets and Rs 3 trillion in defence production envisioned by 2030, India’s defence sector presents a compelling investment story. As global dynamics shift, India's localisation drive and enhanced US collaboration could redefine its role on the geopolitical chessboard.