Defence Stocks Have Been Quietly Turning Heads—Up to 68% Returns Before Budget 2026

Markets don’t just move randomly. Sometimes, there’s a force behind the rhythm, and right now, defence stocks are in that spotlight. With the Union Budget 2026 just days away, the Indian stock market has been brushing up its war gear, led by defence names that have trounced broader averages and handed early birds some striking gains.

In a market that’s seen volatility and hesitation, the Nifty India Defence Index has quietly outpaced the benchmarks. January alone saw many of these stocks post strong double‑digit rises, while the wider indices tread water. Investors are watching closely, betting that the Budget will reinforce government support for defense spending, infrastructure, indigenisation, technology and that this will translate to revenue and profit growth for listed arms makers.

The Numbers That Matter

Dig into the data and you’ll see why headlines spin. Here’s a snapshot of the return story since the last Budget:

• MTAR Technologies surged 68%, far above most heavyweights.

• Bharat Electronics Ltd (BEL): up around 60% since Budget 2025.

• Garden Reach Shipbuilders & Engineers (GRSE): near 58%.

• Solar Industries: climbed 38%.

• Astra Microwave and Paras Defence both posted solid 30%+ gains.

And it’s not just the leaders. Stocks like Bharat Dynamics (BDL), Data Patterns, Mishra Dhatu Nigam (Midhani), and even aerospace giant Hindustan Aeronautics Ltd (HAL) have all chipped in with noteworthy returns in the past year.

This isn’t just noise; it’s structural. Defence capex has been rising, contracts keep rolling in, and the government’s focus on Make in India and indigenisation continues to underpin investor appetite.

What’s Driving the Rally?

There are a few clear threads pulling this rally together:

• Government spending momentum: Defence capital outlay is tracking up. Research houses see allocations for FY27 at higher levels than before, in some cases upward of ₹1.85 lakh crore, with a tilt toward R&D, UAVs/drones, and modern combat systems.

• Strong order books: Companies like HAL and BEL have deep pipelines that extend well beyond a single fiscal year, thanks to multi‑year defence contracts and DAC (Defence Acquisition Council) approvals.

• Policy tailwinds: Indigenisation, export incentives, and priority to high‑tech systems are themes running through strategic budget expectations.

This backdrop has made defence names not just a tactical trade but a sector narrative for investors positioned early ahead of policy announcements, hoping top‑line wins translate to market performance.

Four Stocks Most Eyes Are On

Analysts have circled a few names as Budget 2026 bellwethers:

1. MTAR Technologies

Fast becoming the benchmark outperformer. Its gains are eye‑watering, and brokers are tilting it toward further upside as execution momentum stays firm.

2. Bharat Electronics Ltd (BEL)

A core defence electronics play. BEL is anticipated to benefit from system integration spending on radars, secure communication suites, and more, with strong order inflows and potential contract news acting as catalysts.

3. Hindustan Aeronautics Ltd (HAL)

HAL’s long‑lead aerospace programmes from fighter sustainment to helicopter induction, keep it in the spotlight. Budget support could reinforce capital spending on platforms and engines.

4. Bharat Dynamics Ltd (BDL)

Missiles and underwater systems maker BDL is expected to ride the wave of rising demand for indigenous munitions and guided systems. It’s not the flashiest, but it’s a structural cog in defence modernisation.

It’s Not All Up and Smooth

Markets don’t climb in a straight line. Even as many defence names shine, others lagged or struggled post‑rally. Some smaller names and niche plays have seen their stocks correct sharply after earlier spikes, underscoring a divergent performance landscape in the sector.

What this means for investors is straightforward: breadth isn’t uniform. A handful of names are leading the charge, while others lag or trade sideways. That makes stock selection, not just sector exposure, crucial.

What’s Next: Budget 2026

With Finance Minister Nirmala Sitharaman set to deliver the Budget on February 1, all eyes will be on

• Capex allocation to defence

• Incentives for indigenisation and exports

• R&D tax breaks, offsets and procurement policy cues

If allocation holds firm or rises, expect defence stocks to react positively just as they have in the lead‑up to this moment.

For now, the conversation in broker rooms and market floors has a clear cadence: defence is not a theme in isolation; it’s a narrative, backed by policy traction and an expanding domestic industrial base.

Stay tuned—this Budget might just redraw some of the lines on where capital flows next.