BEL, HAL, GRSE, other defence stocks rally up to 11% ahead of Union Budget 2026. Brokerages weigh in

Amid rising expectations ahead of the Union Budget, major defence stocks such as Bharat Electronics (BEL), Hindustan Aeronautics, Garden Reach Shipbuilders, BEML, Data Patterns, Cochin Shipyard, Apollo Microsystems and BDL rallied by up to x%, as investors bet on a reset in India’s capital expenditure, with defence likely to emerge as a key beneficiary.

BEL shares rose as much as 4.5% to Rs 435 per share, while HAL shares jumped 4% to Rs 4,530 on the BSE. BEML shares jumped 8% to their day’s high of Rs 1,787 per share. Data Patterns rallied 11% to Rs 2,543 apiece on the BSE. Mazagon Dock gained 6% to Rs 2,482, while Apollo Micro Systems was locked in 5% upper circuit at Rs 240.90 per share. Cochin Shipyard and MTAR Technologies surged 5% each.

Brokerage commentary suggests that while the overall fiscal stance is likely to remain disciplined, the composition of government spending could shift meaningfully. Jefferies expects total government capital expenditure to grow by about 12% in FY27 to Rs 12.5 lakh crore, but flags that defence capex may grow much faster—by as much as 25%. This would imply a moderation in non-defence capex growth to the 5–10% range, even as welfare spending edges higher.


What is adding to market confidence is the recent trend, with year-to-date FY26 defence capex already up 57%, highlighting the urgency around preparedness, modernisation and indigenisation. Jefferies also noted that central government defence capex could rise towards 1% of GDP by FY31, a level last seen several years after the Kargil conflict. Importantly, India’s defence spending as a share of GDP still trails global peers, leaving significant room for sustained increases over the medium term.

Motilal Oswal echoes this view, arguing that the Budget math is likely to be realistic, with nominal GDP growth assumed at around 10.1%. The focus, it says, will be on the next phase of reforms under the broader “Viksit Bharat” narrative. While populist measures or direct tax changes are unlikely amid fiscal consolidation, the brokerage sees scope for higher capex allocations to sunrise and strategic sectors such as defence, nuclear and critical minerals. Motilal Oswal expects defence expenditure to rise by about 15% over the estimated Rs 1.8 lakh crore spending in FY26, even after accounting for a one-time emergency procurement of Rs 40,000 crore undertaken this year.

Nuvama added to the optimistic outlook, projecting double-digit growth in defence capital outlay as the modernisation push accelerates and new reforms take shape. It expects large programmes that have been in the pipeline to begin materialising from FY27. The focus is likely to stay on indigenisation, higher R&D spending and exports, with allocations tilted towards areas such as UAVs, drones, anti-drone systems and other advanced technologies. Initiatives like iDEX, which promote start-ups and innovation, are also expected to gain momentum.

Crucially, the expected incremental defence budget comes against the backdrop of heightened operational requirements and the need to fast-track key programmes such as QRSAM, naval platforms and missile systems, with a bias towards the Air Force and Navy. Nuvama believes this structural increase in defence spending will accelerate the shift towards execution-led earnings, making stock selection critical.

As Budget day nears, the sharp move in defence stocks suggests the market has already factored in the possible announcements. The pre-Budget rally, therefore, is less about a one-day event and more about confidence in the defence space.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)