Over the past year, the Indian defence sector has witnessed a remarkable transformation. From robust order inflows and rising exports to record-breaking production targets, this space has emerged as one of the most exciting segments in the broader market. While defence stocks had already delivered stellar gains during the initial Bull Run post-COVID-19, a phase of price consolidation followed. However, recent geopolitical developments are again bringing this sector back into the spotlight, and early signs suggest that a fresh upward trend is taking shape.The resurgence in defence stocks over the past few weeks is not coincidental. With ongoing tensions at the global level, the demand for enhanced military preparedness has gained fresh momentum. Even in regions where ceasefire agreements have been reached, the underlying security concerns remain unresolved. As nations prepare for long-term security challenges, defence budgets are being recalibrated across the world. India is no exception.

India's Defence Minister, Shri Rajnath Singh, recently underscored the government’s strong focus on the sector, highlighting that defence exports have surged 34 times from ₹686 crore in FY2013- 14 to ₹23,622 crore in FY2024- 25. He also noted that defence production is expected to exceed ₹1.60 lakh crore this year, with an ambitious target of ₹3 lakh crore by 2029. These numbers are not just targets; they reflect a shift in the national mindset from being an importer to becoming a global supplier of defence technology. This transformation has been further reinforced during the recent India-Pakistan conflict, where India’s defence systems demonstrated exceptional capability and operational strength. The performance not only validated India’s technological advancements but also positioned the country as a reliable partner for global defence exports.
At the global level, military expenditure has reached a new milestone. According to Stockholm International Peace Research Institute (SIPRI), global defence spending touched $2,718 billion in 2024, up 9.4% from the previous year, the steepest rise since the Cold War era. The global military spending now accounts for approximately 2.5% of the world’s GDP, which stands at around $110 trillion. This translates to total defence spending of $2.7 trillion. In comparison, India’s defence exports are currently at $2.7 billion, representing just 0.1% of the global defence market. If global defence expenditure rises to $3 trillion by 2030 and India increases its share to 1%, the country’s defence exports could reach $30 billion. This underscores a strong growth potential for Indian defence companies, supported by increasing global demand and India’s growing emphasis on domestic manufacturing and expanding defence exports.

India ranks among the top five military spenders globally, with an allocation of $86.1 billion in 2024, up 1.6% year-on-year. But beyond numbers, what stands out is the structural reform in the domestic ecosystem. The “Atmanirbhar Bharat” vision is enabling Indian companies to take centre stage in defence manufacturing. The import data as per SIPRI also indicates that India's arms imports declined by 9.3% between the periods 2015–19 and 2020–24, reflecting the country’s growing capability to design and manufacture its own defence equipment, thereby reducing its dependence on foreign suppliers. As we move from being passive buyers to active producers, Indian defence companies are not just catering to domestic requirements but are also strengthening global defence supply chains.

Looking ahead, the government aims to scale defence exports to ₹50,000 crore by FY29. These targets, alongside rising domestic demand, are likely to create a sustained growth environment for listed defence players. With a focus on indigenisation, long-term capital allocation, and policy support, Indian defence companies are poised to benefit from multi-year tailwinds.

For investors, this marks a potential inflexion point. After a phase of healthy consolidation, the sector is showing early signs of renewed strength. Given the combination of strong fundamentals, favourable policy landscape, and global tailwinds, I believe this could be the beginning of a long-term structural rally in Indian defence stocks.

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