According to Equirus Securities Director Harshit Patel, Hindustan Aeronautics Limited (HAL) remains the standout investment opportunity in India's defence sector despite recent valuation concerns. As reported by CNBC TV18, Patel noted that while defence valuations are now 'one or two standard deviations above the last 10-year mean', HAL's current valuation of around 25-30 times FY28 earnings offers an 'extremely favourable' risk-reward profile. The analyst expects 2026-27 (FY27) to be an 'occasional year', but anticipates 'very strong earnings growth both in 2027-28 (FY28) and 2028-29 (FY29) as multiple large programmes move into execution simultaneously.
The ₹52,000-crore Defence Acquisition Council (DAC) approvals have significantly strengthened the sector outlook, with Bharat Dynamics positioned as a key beneficiary. According to Equirus Securities, Bharat Electronics (BDL) is expected to be among the biggest beneficiaries, with opportunities across man-portable anti-tank guided missiles (ATGMs), the Vishwavara programme and naval mine systems, where it could partner with Adani Defence & Aerospace. The approvals come as India awarded contracts worth more than ₹6.5 lakh crore in 2025-26 (FY26), marking the highest ever defence spending commitment. As per Nuvama Institutional Equities, these approvals further reinforce the shift towards indigenous capabilities and strengthen the long-term outlook for companies with strong execution capabilities.
Beyond the latest approvals, Equirus Securities believes defence electronics will be one of the biggest long-term growth themes as warfare becomes increasingly network centric. The strongest play on electronics content increasing in all these platforms is Data Patterns (India) (BEL), which is evolving from a product supplier into a system integrator. Nuvama Institutional Equities remains constructive on Data Patterns, expecting revenue growth of around 22% year-on-year and healthy operating margins of nearly 34%, supported by favourable product mix and operating leverage. The analyst also sees private companies such as Apollo Micro Systems, Astra Microwave Products and Astra Microwave Products benefiting as they take on larger integration projects rather than supplying only components. Patel noted that 'the approvals over the last four to five years have been pretty strong' and expects many of them to translate into confirmed orders over the coming months.
According to Equirus Securities, while defence stocks have become expensive after their sharp rally, companies with strong execution visibility, growing electronics content and large indigenous programmes are likely to remain the biggest long-term winners. Nuvama Institutional Equities has retained a positive view on the sector, naming Solar Industries India and Bharat Electronics Ltd. as preferred stock picks. The brokerage believes India's defence industry has entered fiscal 2027 with solid structural visibility, supported by healthy order books, continued indigenisation and a robust procurement pipeline. However, it expects execution trends to remain mixed across companies in the June quarter, with firms having shorter execution cycles and higher localisation likely to outperform. As reported by CNBC TV18, Patel emphasized that the strength of India's defence spending, with the country awarding contracts worth more than ₹6.5 lakh crore in 2025-26 (FY26), provides a solid foundation for continued sector growth.
