Defence Stocks Surge Ahead of Budget 2025; HAL, BDL, Paras Defence Gain Up to 5%

Highlights:

• Defence stocks rally as investors anticipate higher budgetary allocations.
• HAL, BDL, Data Patterns, Paras Defence, and Bharat Electronics rise 3-5%.
• Government focus on modernization, R&D, and self-reliance expected to drive sector growth.
• Defence budget CAGR at 8.1% over the past decade, but its share in GDP declines.

Stock Market Reaction & Investor Sentiment

Defence stocks witnessed a strong rally on January 31, ahead of the Union Budget 2025, as optimism builds around higher defence spending. Shares of Hindustan Aeronautics (HAL), Bharat Dynamics (BDL), Bharat Electronics (BEL), Data Patterns, and Paras Defence surged between 3-5%, driven by expectations of increased capital expenditure and policy incentives for the sector.

Budget 2025: A Game-Changer for Defence?

Market analysts believe the upcoming budget could significantly reshape India’s defence sector, with a strong emphasis on:

• Modernization & self-sufficiency in defence manufacturing.
• Higher capital expenditure for advanced weapon systems.
• Increased R&D spending in critical areas like cyber defence, unmanned aerial systems (UAS), and space technology.
• Policy incentives to boost domestic production under Atmanirbhar Bharat & Make in India.

Amey Belorkar, Fund Manager at IDBI Capital Markets & Securities, noted:
“The government’s commitment to self-reliance in defence and aerospace is expected to be reinforced through targeted budgetary allocations. We anticipate strong support for MSMEs, innovation-driven policies, and streamlined procurement processes. Emerging sectors such as cyber defence, UAS, and advanced materials could attract significant private investments.”

Defence Budget Trends & Sector Outlook

Over the past 10 years, India’s defence budget has grown at a CAGR of 8.1%, rising from ₹2.85 lakh crore in FY15 to ₹6.22 lakh crore in FY25. However, its share of GDP has declined from 2.4% in FY21 to 1.9% in FY25, reflecting the need for increased allocations.

While India continues to be one of the world’s largest defence importers, the government’s push for indigenous manufacturing is expected to boost domestic defence companies and create new investment opportunities.

Investor Takeaway

With a strong focus on self-reliance, technology-driven defence capabilities, and global market positioning, Budget 2025 could provide a significant catalyst for defence sector stocks. Traders and long-term investors should keep an eye on policy announcements related to capital expenditure, R&D incentives, and procurement reforms, which could further drive stock performance in the sector.