$60 billion opportunity! Will defence stocks fire on all cylinders and who will be the biggest beneficiary?

India’s defence industry is entering a new phase of growth, with the combat deployment of indigenous weapons giving locally developed systems a stronger stamp of credibility in global markets.

The shift is backed by a sharp increase in defence spending. India’s defence budget has surged from Rs 2.53 trillion in FY14 to Rs 6.81 trillion in FY26, reflecting the Narendra Modi-led government’s strong focus on military modernisation and national security.

At the same time, the government’s preference for domestic manufacturers under the Atmanirbhar Bharat initiative is creating a powerful multi-year opportunity across aircraft, helicopters, missiles, naval platforms, artillery systems, air-defence systems, defence electronics, radar systems and unmanned platforms.


With spending rising and Indian-made weapons increasingly finding their way into combat and export markets, the question for investors is straightforward: can defence stocks fire on all cylinders?

The Rs 58,400 crore export opportunity

India’s defence export story is gathering pace. Jefferies expects defence exports to grow 11% annually through fiscal 2030, reaching Rs 584 billion.

The momentum is already visible. Indian defence exports rose 63% year-on-year to Rs 384 billion in fiscal 2026, surpassing the government’s Rs 300 billion target. The Ministry of Defence has also indicated that exports could exceed the FY29 target of Rs 50,000 crore.

A key catalyst has been the operational deployment of indigenous systems during Operation Sindoor. The use of BrahMos and Astra missiles, Akash air defence systems, Akashteer command systems and Pinaka rockets has strengthened the export credibility of Indian defence platforms, Jefferies said.

That credibility is beginning to translate into actual orders. The impact is particularly visible in firm BrahMos contracts, including deals with Vietnam and Indonesia. India is also in discussions with countries such as the UAE, while interest in Indian defence systems is widening across Southeast Asia, the Middle East, Africa and Latin America.

Jefferies believes Indian defence companies could see growing demand for missiles, artillery and electronic systems following successful deliveries to Armenia. Europe’s rearmament cycle may not immediately translate into large platform exports because of established supplier relationships, but it could open the door for Indian companies to participate as component and subsystem suppliers.

$60 billion domestic goldmine

India’s domestic defence opportunity could exceed $60 billion over the next four years. Domestic defence capital spending is expected to grow at a 16% compound annual growth rate between fiscal 2026 and fiscal 2030, significantly ahead of the 10% growth expected in overall defence capital expenditure.

Order visibility is also improving. More than $120 billion of acquisition proposals cleared during fiscal 2025-26 provide visibility for medium-term order flows, Jefferies said. Private companies are already making inroads. The revenue share of private players among key listed defence companies rose from 9% in fiscal 2023 to 16% in fiscal 2026.

“The government has been taking steps to open missile production to Indian private players. These initiatives improve order inflow visibility for the defense sector,” Motilal Oswal said in a note.

DAC’s newest Rs 1.10 lakh crore boost

The Defence Acquisition Council (DAC), chaired by Defence Minister Rajnath Singh, has added another layer of support to the domestic defence opportunity.

The council gave in-principle approval to acquisition proposals worth around Rs 1.10 lakh crore for the Indian defence forces, with around 98% of the approved procurements set to be sourced from Indian industry.

Which stocks stand to gain?

Motilal Oswal has maintained its Buy rating on Bharat Electronics and retained its target price at Rs 530. The brokerage said the stock is currently trading at 42.2x, 36.2x and 32.2x its FY27E, FY28E and FY29E earnings per share (EPS), respectively. It has retained its estimates and valued the stock at 45x two-year forward earnings.

On Hindustan Aeronautics Ltd (HAL), Motilal Oswal has also reiterated its Buy rating and retained its target price at Rs 5,800. HAL is currently trading at 32.4x, 27.0x and 22.3x its FY27E, FY28E and FY29E EPS, respectively. The brokerage has maintained its estimates and based the target price on the average of discounted cash flow (DCF) valuation and 30x two-year forward earnings.

Jefferies has also maintained a Buy rating on HAL, with a price target of Rs 6,800, implying 39% upside. The brokerage expects HAL to deliver a 15% earnings compound annual growth rate between fiscal 2026 and fiscal 2029.

Bharat Electronics also carries a Buy rating from Jefferies, with a price target of Rs 490, representing 20% upside. The brokerage expects BEL’s earnings to grow at 17% annually over the same period.

For Astra Microwave Products, Motilal Oswal has maintained its Buy rating and kept its target price unchanged at Rs 1,900. The stock is currently trading at 66.3x, 48.5x and 34.4x its FY27E, FY28E and FY29E EPS, respectively. The brokerage has retained its estimates and based its target price on 42x two-year forward earnings.

Solar Industries

Jefferies initiated coverage on Solar Industries with a Buy rating and a price target of Rs 28,160. The target implies over 30% upside from the company’s recent price.

Solar’s defence business is expected to become a much larger part of the company’s overall operations, rising from 27% of sales in fiscal 2026 to 40% by fiscal 2030. Defence revenue could grow at a 42% compound annual rate during the period, supported by a defence order book of about Rs 180 billion.

Solar has also moved well beyond its traditional industrial explosives business, expanding into rockets, loitering munitions, drones and other aerospace and defence products. Jefferies expects the company’s market share in domestic defence spending and exports to rise to 4.5% by fiscal 2030 from 1.9% in fiscal 2026.

Bharat Dynamics

India’s primary missile manufacturer and system integrator, has been rated Hold by Jefferies with a price target of Rs 1,280. While its Rs 262 billion order book provides earnings visibility, the brokerage said the valuation leaves limited room for upside. It expects Bharat Dynamics’ earnings per share to grow at a 30% compound annual rate through fiscal 2030, albeit from a low base.

Data Patterns

Jefferies has started coverage on Data Patterns with a Buy rating and a target price of Rs 5,545 per share. The brokerage sees three key levers supporting the company’s medium-term growth: India’s defence indigenisation focus and export pipeline build-up driving visibility on double-digit revenue growth, lower working capital intensity through client diversification, and improving return on equity (ROE) and return on capital employed (ROCE) as the earnings trajectory strengthens.

Jefferies expects Data Patterns’ in-house technology and participation in a growing defence opportunity to translate into profits rising 2.4x between FY26 and FY30E.

Export growth is another potential catalyst. Management expects export momentum to improve meaningfully from FY27E onwards. The company also supplies key components related to testing of BrahMos missile systems, which has high export potential. Jefferies believes exports have the potential to rise to 16% of Data Patterns’ sales in the medium term.

The company’s balance sheet and return ratios are also expected to improve. Working capital should gradually decline to 70%-75% of sales from the current 100%+, helped by client diversification, particularly as dependence on DRDO reduces. Since the company’s clients are government entities, certainty of payment is not a major concern compared with the timing of payments.

For investors, the key question now is not whether the defence opportunity is large, but which companies are best placed to convert that opportunity into sustained growth. With Jefferies seeing upside across several defence names, the race for the biggest beneficiary is clearly heating up.

(This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here)