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Nifty India Defence index slips over 2%; BDL, GRSE, Solar down up to 5%
Shares of defence companies public as well as private were under pressure, with Nifty India Defence index falling over 2 per cent on the National Stock Exchange (NSE) in Thursday's intra-day trade.
Bharat Dynamic (BDL) slipped 5 per cent to ₹1,883.40 on the NSE in intra-day trade. With today's fall, the stock has corrected 10 per cent from its record high level of ₹2,096.60 touched on May 30, 2025.
Astra Microwave Products, Garden Reach Shipbuilders & Engineers (GRSE), Solar Industries, Data Patterns (India), Zen Technologies, Paras Defence and Space Technologies, Hindustan Aeronautics, BEML and Bharat Electronics (BEL) were down in the range of 2 per cent to 4 per cent.
At 01:44 PM; Nifty India Defence index, the top loser among sectoral indices, was down 2.3 per cent, as compared to 0.41 per cent decline in the Nifty 50.
In the past one month, the Defence index has underperformed the market by falling 3.7 per cent, as against 1 per cent rise in the benchmark index. However, in the past three months, Nifty India Defence index has zoomed 42 per cent, as compared to 13.5 per cent rally in Nifty 50.
Defence Sector Outlook
The Indian defence sector is set to grow rapidly, driven by new technologies like artificial intelligence, robotic and autonomous systems that are improving defence capabilities. Additionally, India has proposed a defense budget of ₹6.81 trillion for 2025-26, reflecting a 9.5 per cent increase from the previous year.
Increasing regional tensions are pushing India to focus more on securing its borders and strengthening maritime defence. Defence exports are expected to rise further as India positions itself as a reliable global supplier. Together, these factors are making the sector more competitive and critical to the country's security goals.
The Indian government's 'Make in India' and 'Atmanirbhar Bharat' initiatives have emphasised self-reliance in defence manufacturing. Measures such as reserving specific defence items for domestic suppliers and easing FDI norms have significantly boosted local production.
Partnerships between government agencies and private enterprises have accelerated progress in defence technologies, including weaponry, ammunition, aerospace systems and electronics, thereby strengthening domestic manufacturing capabilities, Solar Industries said in its FY25 annual report.
Meanwhile, analysts expect defence budgets to grow due to various geopolitical conflicts and border tensions. The private defence industry is poised to benefit significantly from NATO's estimated $1.4 trillion defence spending in CY24-35, driven by Europe's rearmament efforts, increased private sector participation in tenders, proven battle-tested capabilities, and a sustained focus on R&D and IP-led manufacturing.
Defence companies continued to benefit from the government's push on the indigenization while the geopolitical events during the March quarter led to Emergency Procurement from government which will lead to additional orders for the defence companies, analysts at PL Capital said.
Brokerages view on Bharat Dynamics (BDL)
Motilal Oswal Financial Services initiated coverage on BDL with a Neutral rating and a target price of ₹ 1,900 based on 42x Sep'27E P/E. The brokerage firm said it liked the business model of BDL and its ability to scale up its revenues and order book in current scenario, however, with fair valuations, analysts said they would look for lower price points to enter the stock.
Key risks for the company include a decline or reprioritization of the Indian defense budget, termination of existing contracts or failure to succeed in tendering projects, changes in procurement rules and regulations of the MoD and the government, and supply-chain-related issues, the brokerage firm said.
Elara Capital lowered its FY26E EPS by 17 per cent and FY27E EPS by 8 per cent on Akash missile execution from FY26 vs its assumption in FY25, lower-than-expected margin in FY25 with likely less scope for further improvement.
The recent conflict highlighted product quality and combat mettle of BDL's product portfolio and would open various export opportunities. On July 1, company report, brokerage firm said it downgrade BDL to Sell from Accumulate, as the current price already factors in all the positives, 400-600bp lower EBITDA margin, and it has outperformed the Nifty in the past three months.
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