Defence stocks have delivered exceptional returns in 2026, with the Nifty India Defence index adding 23% year-to-date and growing 16% over the past year, according to data from NSE. Among the 19 stocks in the sector, nine have delivered double-digit gains, with MTAR Tech rallying 285% in a year and Paras Defence following with a 93% increase. However, some stocks have underperformed, with Cochin Shipyard and Bharat Dynamics emerging as top laggards, both losing 26% during this period. Emkay Global has initiated coverage on the defence sector, identifying Hindustan Aeronautics (HAL) as its top bet followed by Bharat Electronics (BEL), BEML and Bharat Dynamics in order of preference. The brokerage believes the defence story is far from over, supported by continued policy support, increased private-sector participation, and rising export capabilities.
Analysts at Jefferies believe India's defence spend should see a double-digit compound annual growth rate (CAGR) in the medium-term amid global geopolitical tensions. As reported by Business Standard, analysts believe private sector companies particularly have visible growth prospects north of 20%, backed by government focus on domestic manufacturing and building the private sector supply chain. The brokerage firm expects India's domestic defence capital spend to rise at 16% CAGR over FY26-30E versus 10% CAGR in overall defence capex, driven by indigenization focus. Defence exports are also gaining momentum as operational validation of Indian-made systems such as the Akashteer command & control system and BrahMos missiles during Operation Sindoor has improved export credibility. Analysts said their estimates factor defence exports rising at an 11% CAGR over FY26-30E to ₹58,400 crore.
India's defence production reached an all-time high of ₹1.8 trillion (+15.6% YoY) in FY26, with growth even more pronounced over the longer term, rising at an 18% CAGR since FY11. As reported by Emkay Global, this robust growth highlights the rapid expansion of indigenous manufacturing capabilities reflecting sustained investments in domestic defence industrial capacity over the past decade. India's defence exports, which stood at ₹6.9 billion in FY14, reached an all-time high of ₹380 billion in FY26 (+63% YoY), highlighting the growing global acceptance of India-made defence products. India aims to cross ₹500 billion in exports by 2029 and reach ₹3 trillion in terms of production. The brokerage noted that such achievements and goals highlight India's emergence as a reliable global defence partner.
HAL shares were trading 0.73% higher at ₹4,828 per share on BSE with a market capitalisation of ₹3,22,887.91 crore at 2 pm on Wednesday. Emkay Global has given a 'Buy' rating to HAL with a target price of ₹5,950 per share, indicating a 23% upside in its share price valuation. The brokerage expects the company to see improvement in operational performance with execution of the LCA Tejas MKIA order, helping deliver earnings CAGR of 13% over FY26-29E. BEL shares were up 0.16% at ₹397.95 per share on BSE, with Emkay setting a target price of ₹500 per share, indicating an upside of 26%. The brokerage highlighted BEL's consistent execution track and strong focus on research and development to boost indigenisation. BEML shares were trading 0.52% higher at ₹2,103.30 per share with a market cap of ₹17,518.18 crore, and Emkay gave a 'Buy' rating with a target price of ₹2,600 per share, indicating a 24% upside. The company has an order book of ₹217 billion and near-term revenue visibility through FY29. BDL has a relatively cautious view with an 'Add' rating and target price of ₹1,350, implying 13% upside, as increased competition and higher R&D spending could weigh on margins in the near term.
As reported by Business Standard, Apollo's order book improved sharply from ₹735 crore in Q1FY26 to ₹1,704 crore by Q1FY27. Management expects ₹2,500-3,000 crore of additional orders during FY27, while major opportunities are emerging across missile programmes. The acquisition of IDL Explosives and the acquisition of a 41.33% stake in Premier Explosives are expanding capabilities beyond electronics into explosives, warheads, propellants and rocket motors. Analysts at ICICI Securities expect Apollo to grow from a subsystem supplier towards a broader weapon-systems platform. Apollo's earnings growth is expected to remain robust in the coming period, led by strong execution, consistent order inflows and rising contribution in key defence systems, with the brokerage recommending a BUY rating with a target price of ₹485 based on 60x P/E to consolidated FY28E EPS.
