Operation Sindoor demonstrated the advancement India’s armed forces have made in developing and deploying the latest technology. The successes in the battlefield have accelerated an already strong rally in the stocks of defence-related companies on the Dalal Street.
As of June 10, the NSE Nifty India Defence Index surged more than 37 per cent in 2025. In contrast, the broader Nifty50 index gained just over 6 per cent in the same period. Individual defence stocks have been among the biggest gainers on the market this year. While Hindustan Aeronautics is up 22 per cent, Mazagon Dock has surged 53 per cent, Paras Defence & Space has sky rocketed as much as 60 per cent and Garden Reach Shipbuilders & Engineers has doubled. Solar Industries and Bharat Dynamics have gone up 70 per cent and Bharat Electronics 35 per cent.
Market analysts are not surprised by the strong rally the defence and aerospace sector companies have seen. Amit Anwani, research analyst at PL Capital (Prabhudas Lilladher), said the structural reforms that had been implemented over the past few years and the strategic efforts to develop and manufacture defence equipment in India were translating into strong growth numbers. The domestic demand is strong, and exports, too, are rising.
Many of these companies currently have a strong order book, and that gives a lot of optimism for the road ahead. As of March 31, Hindustan Aeronautics had an order book of a little over Rs1.89 lakh crore; Bharat Electronics, Rs71,650 crore; Mazagon Dock Shipbuilders, Rs32,260 crore; and Bharat Dynamics, Rs22,700 crore.
Last financial year, domestic defence production crossed Rs1.4 lakh crore, of which 78 per cent was contributed by the defence public sector companies, according to Omniscience Capital. By 2029, the domestic defence production is expected to touch Rs3 lakh crore.
India is expected to become the third largest economy in the world in a few years. As it grows, the expectation is that it could increase its defence budget from around 2 per cent now to 3 per cent or even 4 per cent. When India’s GDP touches $10 trillion, the defence budget is expected to grow to more than $300 billion, which implies a 16-17 per cent annualised growth till 2035, according to Vikas Gupta, CEO of Omniscience Capital.
“The evolving world order, risky neighbourhood and a huge pent-up demand from the Indian armed forces due to decades of underspending on defence make it inevitable that we need to ramp up our defence budget for the next decade,” said Gupta.
Apart from bolstering its domestic defence capabilities, India is also eyeing a larger share of the export market. Last year, India exported defence goods worth around Rs23,622 crore and the government has an ambitious target of achieving Rs50,000 crore in annual defence exports by 2029.
Anwani is particularly bullish on defence electronics, which, he says, will play a major role when it comes to advanced warfare.
However, one thing the investors should note is that the valuations of defence stocks have soared massively over the past year and the high growth potential might already be priced in. Therefore, even as the addressable market is large and growth rates are likely to remain high, analysts advise caution in the near-term.