HAL, BEL Shares Surge As NATO Plans To Boost Defence Spending; Nifty Defence Index Up 1%
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Defence stocks like HAL and BEL rose as NATO pledged to raise defence spending to 5% of GDP by 2035
Defence Shares Rise: Shares of domestic defence companies climbed up to 2 per cent on Thursday, June 26, after the North Atlantic Treaty Organisation (NATO) announced plans to ramp up defence spending significantly. The move came after member nations agreed to raise their defence budgets to 5 per cent of their GDP by 2035 — more than doubling the previous 2 per cent target.
The decision was formalised in NATO's final summit statement, which followed sustained pressure from U.S. President Donald Trump. 'Allies commit to invest 5 per cent of GDP annually on core defence requirements as well as defence- and security-related spending by 2035 to ensure our individual and collective obligations," said the 32-member alliance.
The announcement sparked renewed buying interest in Indian defence stocks. Hindustan Aeronautics Ltd (HAL) and Bharat Electronics Ltd (BEL) each rose as much as 2 per cent in intraday trade. The Nifty India Defence index gained around 1 per cent, led by gains in Garden Reach Shipbuilders, DCX Systems, and Bharat Dynamics.
India's defence export momentum has been steadily gaining strength. Since FY2016, total defence exports have surged 13 times, with private sector exports growing by a staggering 67x. The share of domestic procurement in India's defence spending has also increased to 75 per cent, underlining the government's push for self-reliance.
The private sector's role has expanded significantly, with its share in defence exports jumping from 13 per cent in FY17 to 62 per cent in FY24. Defence items are being exported to countries like the U.S., France, and Armenia — often involving niche systems such as radar, small arms, and support for co-production initiatives.
Despite this momentum, India's contribution to the global defence export market remains low. Between 2020 and 2024, India accounted for just 0.2 per cent of global defence exports. This is in sharp contrast to its position as the world's largest arms importer, with a 9.8 per cent share during 2019–23.
Path Ahead: Make in India and Export Push
'The global market is dominated by players like the U.S. (43 per cent share) and France (9.6 per cent), indicating significant room for India to expand its export footprint," noted InCred Equities. With the government's 'Make in India' initiative, a growing defence manufacturing base, and rising private sector involvement, India is well-positioned to capture a larger share of the global arms trade in the years ahead.
The government's focus on indigenisation, policy support for defence PSUs, and measures to cut import dependence are seen as structural positives for the Indian defence sector — making it a long-term theme to watch for investors.
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June 26, 2025, 13:40 IST
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