BEL, HAL, and BHEL shares tumble up to 7% as defence Budget falls short of expectation

Shares of Bharat Electronics Ltd (BEL), Hindustan Aeronautics Ltd (HAL), and Bharat Heavy Electricals Ltd (BHEL) declined up to 7% on Monday, as the Indian defence sector was hit by investor disappointment following the Union Budget FY26. The defence budget allocation of Rs 4.92 lakh crore fell short of market expectations, spurring declines across key public and private sector defense stocks.

BEL shares dropped 6.5% to Rs 263.4, while HAL slipped 6.9% to Rs 3516.45, and BHEL fell 5.1% to Rs 189.65 on the BSE. In addition to the PSU defence giants, other stocks in the sector also experienced notable losses. Bharat Dynamics saw its shares tumble 10.2% to Rs 1128.45, while private players like Paras Defense and Space Technologies, Data Patterns, and MTAR Technologies faced significant declines as well.

Paras Defense fell 7.1% to Rs 981, Data Patterns dropped 3% to Rs 2046, and MTAR Technologies slid 3.1% to Rs 1557.05 on the BSE.


Analysts had expected a more substantial increase in the defence allocation, with some estimating it could rise from last year’s Rs 6.22 lakh crore. The modest uptick in the overall capital expenditure, from Rs 11.11 lakh crore to Rs 11.2 lakh crore, also disappointed investors, raising concerns over the government's focus on infrastructure and political pressures.

The more conservative spending plans raised concerns about the future of key defence and infrastructure sectors, leading to widespread selling across defense stocks.

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"The government's focus until now was on infrastructure and capex seems to be taking a hit due to political compulsions and freebie politics. With this modest increase the railways, defense, infrastructure and engineering is likely to take a hit. On the other hand, FMCG, auto, and consumer durables are likely to be in the limelight going forward," Apurva Sheth, Head of Market Perspective & Research, SAMCO Securities said.

Despite an initial rally, investor sentiment turned negative following Finance Minister Nirmala Sitharaman’s budget speech on Saturday. This marked her 8th budget presentation and second term under the Modi 3.0 government. However, the defense sector was left disappointed by the fiscal allocations.

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