Soaring Defence Stocks: India's Path to Self-Reliance Amid Rising Tensions

Indian defence sector stocks, which recently dipped from their peaks, are on an upward trajectory again, driven largely by escalating tensions with Pakistan. The surge is further backed by the successful demonstration of India's homegrown defence systems, underscoring the critical need for self-reliance in defence manufacturing.

Over the past three months, the Nifty India Defence index has surged more than 30%, a reflection of robust investor confidence in the strategic importance and growth of India's domestic defence sector. This index encompasses companies that generate significant revenue from defence-related products and services.

The April 2025 factsheet of the Nifty India Defence index names Hindustan Aeronautics, Bharat Electronics, Solar Industries India, Mazagon Dock Shipbuilders, and Bharat Dynamics as its top constituents by weight. Accelerated by policy initiatives and reforms, the government of India has been promoting indigenous defence manufacturing as part of the Make in India drive.

With this initiative, defence production has reached outstanding levels, delivering substantial returns for investors in major public sector undertakings (PSUs). The government has rolled out production-linked incentive (PLI) schemes in various sectors to make Indian manufacturers competitive on the global stage.

Investments are pouring into defence and aerospace manufacturing, with several hubs being established. Major global players have shown interest in partnering with India, coinciding with defence exports hitting a record Rs 23,622 crore ($2.76 billion) in 2024-25, growing 12.04% over the previous fiscal year.

This export growth reflects increased global acceptance of Indian defence products. Defence Public Sector Undertakings (DPSUs) noted a 42.85% rise in exports, signifying the Indian industry's capability to integrate into the global supply chain.

India's journey from an import-heavy defense force to a self-reliant powerhouse is evident as defence exports encompass munitions, arms, and components, reaching 80 countries last year. Top defence firms like Hindustan Aeronautics and Cochin Shipyard have seen stock increases of 1,100-1,650% over five years.

(With inputs from agencies.)