Defence Stocks Rally as Global Military Spending Surges; HAL, Mazagon Dock, GRSE Lead Gains

Mumbai, March 5, 2025 – Indian defence stocks witnessed strong gains on Tuesday, driven by a surge in global military expenditure and renewed investor confidence in India’s indigenous defence manufacturing sector. The rally followed strong gains in European defence stocks, which soared after geopolitical uncertainties prompted European nations to reassess their security policies.

Stock Movements in the Defence Sector

• Garden Reach Shipbuilders & Engineers Ltd (GRSE) surged 9.61% to ₹1,331.05 per share after a four-day losing streak.
• Hindustan Aeronautics Ltd (HAL) gained 4.49% to ₹3,330 on the back of strong institutional buying.
• Mazagon Dock Shipbuilders Ltd rose 5.52%, while Cochin Shipyard Ltd advanced 7.4%.
• Bharat Electronics Ltd (BEL) and Paras Defence & Space Technologies Ltd added up to 3% in intraday trade.

The rally in Indian defence stocks mirrored sharp gains in European defence companies after U.S. presidential candidate Donald Trump’s statements on NATO security commitments led to uncertainty over U.S. support for European allies.

Why Are Global Defence Stocks Rising?

The surge in defence stocks globally is largely due to heightened geopolitical tensions and a shift in military strategies by European nations. Trump’s uncertainty over NATO’s security guarantees has forced European leaders to rethink their defence spending priorities, triggering a significant uptrend in European defence companies.

On Monday, major European defence stocks recorded double-digit gains:

• Germany’s Rheinmetall surged 15%.
• Italy’s Leonardo climbed 17.3%.
• France’s Thales gained 16.7%.
• BAE Systems in the UK jumped 14.3%.
• Sweden’s Saab advanced 11.6%.
• The Stoxx Europe Aerospace & Defence Index saw its largest single-day jump since November 2020, rising 8%.

India’s Defence Push: A Major Catalyst for Stock Gains

The rally in domestic defence stocks coincides with India’s continued efforts to boost self-reliance in defence production. The Empowered Committee for Capability Enhancement of the Indian Air Force, led by Defence Secretary Rajesh Kumar Singh, submitted a report to Defence Minister Rajnath Singh on March 3, outlining strategies to strengthen India’s defence capabilities.

• The committee’s recommendations focus on:
  Expanding domestic defence manufacturing to reduce reliance on imports.
• Encouraging private sector participation for increased efficiency and capacity.
• Enhancing India’s air and naval power with indigenous aircraft, warships, and missile systems.
• Strengthening public-private partnerships to improve defence production.

These initiatives align with India’s Aatmanirbhar Bharat (self-reliance) mission in defence, which has been a key driver for stocks like HAL, BEL, and Mazagon Dock.

Stock Market Experts See Long-Term Growth in Defence Sector

Market analysts believe that defence stocks will continue to outperform, given India’s rising defence budgets, strong export potential, and increasing global tensions.

“India’s defence sector remains a key long-term growth story. With the government’s aggressive push for indigenisation, companies like HAL, BEL, and Mazagon Dock are well-positioned to benefit from large defence contracts. Moreover, rising global defence spending will keep investor sentiment strong,” said Amit Goel, Senior Research Analyst at Motilal Oswal.

India’s defence exports crossed ₹16,000 crore in FY24, with major firms securing international contracts for aerospace components, missile systems, and warships.

Investment Outlook: Should Investors Buy Defence Stocks?

While defence stocks remain a strong long-term bet, experts advise caution in the short term due to market volatility. Stocks like HAL, Bharat Dynamics, and BEL are considered top picks due to their:
✔ Robust order books with multi-year contracts.
✔ Consistent government support through policy incentives.
✔ Technological advancements in defence equipment manufacturing.
✔ Export opportunities in Asian and African markets.

However, investors should monitor geopolitical developments and policy shifts that could impact future growth trajectories.

Conclusion: A Promising Future for India’s Defence Industry

The strong rally in Indian defence stocks highlights the sector’s growing importance in India’s economy and national security strategy. As global military spending increases and India accelerates its self-reliance initiatives, the defence sector is expected to witness sustained growth, making it a key area of interest for investors.