Will BDL, HAL & other defence stocks deliver rocketing returns? Here’s why this brokerage remains bullish

India’s defence sector has emerged as one of the most attractive long-term structural growth opportunities within the manufacturing universe. The sector remains well-positioned to benefit from military modernisation, rising localisation, a strong domestic order pipeline, growing exports and sustained policy support, Bajaj Broking said in its latest research report.

India’s defence budget has soared multifold from Rs 2.53 trillion in FY14 to Rs 6.81 trillion in FY26, the brokerage said, adding that this reflects the Prime Minister Narendra Modi-led government’s strong commitment towards military modernisation and national security.

This sustained increase in capex, along with procurement preference for domestic manufacturers under the Atmanirbhar Bharat initiative, has created a robust multi-year opportunity across aircraft, helicopters, missiles, naval platforms, artillery systems, air-defence systems, defence electronics, radar systems and unmanned platforms, according to Bajaj Broking Prive’s report. It added that the Defence Acquisition Procedure (DAP), positive indigenisation lists, defence industrial corridors, and liberalised FDI norms have further boosted the domestic manufacturing ecosystem.

Why India’s defence sector remains structurally well-positioned

India’s defence production reached an all-time high of Rs 1.78 trillion in FY26, marking 15.6% YoY growth and more than doubling since FY21. At the same time, defence exports surged to a record Rs 38,424 crore, with Indian defence equipment being exported to over 80 countries, highlighting the increasing global acceptance of indigenous platforms and weapon systems.

Bajaj Broking noted that the defence sector is also seeing a gradual shift from PSU-led manufacturing toward a more diversified ecosystem with increasing participation from private companies, MSMEs, and defence startups. Emerging themes such as drones, loitering munitions, AI, autonomous systems, cybersecurity, electronic warfare, and space-based surveillance are expected to drive the next phase of growth, it added.
“Overall, India’s defence sector remains structurally well-positioned to benefit from long-term military modernisation requirements, rising localisation, a strong domestic order pipeline, growing exports, and sustained policy support,” the brokerage said.Also read | From diamonds to defence: India, Belgium target 2x trade in 5 years

Bajaj Broking on Bharat Dynamics share price

Bharat Dynamics is the primary manufacturing base for guided missile systems, underwater weapons, and allied equipment for the Indian armed forces, Bajaj Broking highlighted, adding that the company reported a robust revenue growth of 145% YoY in the seasonally weak Q1 FY27 after a challenging FY26, indicating that the execution delays witnessed over the past year may be gradually easing.

“ We believe the easing of supply chain constraints for missile components supported the strong revenue performance in Q1FY27. However, it would be prudent to await another quarter before concluding that execution challenges have been fully resolved, given BDL’s continued dependence on imported components and ongoing geopolitical uncertainties. Supported by a strong order pipeline and expected order inflows, BDL’s valuations remain reasonable relative to peers. While the recent large orders would contribute meaningfully from FY29 onwards, the existing order backlog of 10.8x FY26 revenue should drive healthy growth over the next 1-2 years,” Bajaj Broking said.

The domestic brokerage remains constructive on the stock, subject to continued improvement in supply conditions, but stays cautious amid persistent geopolitical risks in West Asia. It recommends a gradual accumulation while closely monitoring global developments. It has an ‘Add’ rating on the shares of the company.

Bajaj Broking on Hindustan Aeronautics share price

Hindustan Aeronautics (HAL) is India’s leading aerospace and defence manufacturer, having developed 17 aircraft platforms inhouse and produced 14 under licence, Bajaj Broking said, adding that as a key beneficiary of India’s indigenisation drive and rising domestic defence spending, HAL is strategically positioned at the centre of the country’s long-term aerospace manufacturing ecosystem.

“We view HAL as a compelling multi-year defence opportunity, with the investment thesis increasingly dependent on execution rather than demand visibility. The company’s record order book of Rs 2.54 lakh crore provides revenue visibility for the next 7-8 years, shifting investor focus towards production ramp-up and timely deliveries. With indigenous platforms gaining a larger share of defence procurement and import substitution remaining a key policy priority, HAL is well placed to sustain a long-term growth trajectory,” the domestic brokerage further said, while maintaining its ‘Add’ rating on the shares of the company.

Also read | HAL shares rise nearly 3% as GE Aerospace delivers 3 more F404 engines for Tejas Mk1A

(With inputs from agencies)

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