NATO defence budget hike: HAL, BEL, BDL, Paras Defence, Ideaforge, others to benefit. How many of these you own?
The upbeat sentiment in defence stocks lifted the Nifty India Defence index by nearly 1.5%, with most of its constituents trading in the green.
The surge in sentiment follows the North Atlantic Treaty Organisation (NATO) leaders' declaration at the Hague Summit, where member states reaffirmed their 'ironclad commitment' to collective defence. They pledged to invest up to 5% of their GDP annually in defence and security-related sectors by 2035.
This includes a minimum of 3.5% allocated to core defence capabilities and up to 1.5% for the protection of critical infrastructure.
Analysts believe the development could open up significant export opportunities for Indian defence manufacturers.
'If NATO members indeed raise defence spending to 5% of GDP—a substantial increase from current levels—it could significantly reshape global defence procurement dynamics. For India, which is rapidly expanding its defence manufacturing and exports, this shift presents both commercial opportunities and strategic implications,' said Prashanth Tapse, Research Analyst at Mehta Equities Ltd.
'India, with its lower production costs and improving indigenous capabilities, could emerge as an attractive secondary supplier for NATO countries,' he added.
Echoing similar views, Krishna Doshi, Research Analyst at Ashika Institutional Equities, said the move opens up substantial export opportunities for Indian defence companies.
'Indian firms already supply a wide range of products including arms, ammunition, fuses, complete weapon systems like the BrahMos supersonic cruise missile, artillery guns, Dornier-228 aircraft, radars, Akash air defence systems, Pinaka rockets, armoured vehicles, as well as protective equipment and uniforms.'
Among NATO's 32 member nations, the United States and France are already significant markets for Indian defence exports, she noted.
'Moreover, the Indian government's policy push to promote indigenous defence systems and its ambitious goal of achieving ₹ 50,000 crore in defence exports by FY29 further strengthens the sector's outlook,' Doshi said.
Bhavika Joshi, Business Head, INVasset PMS believes that as Western OEMs face capacity constraints, India's defence industry is emerging as a credible and cost-effective partner to plug these gaps.
'From radars and electronics to artillery and ammunition, Indian companies are now part of global defence supply chains. Bharat Forge recently exported 100 155 mm artillery guns to a European country and signed an LOI to supply howitzers to the US Army — milestones that mark India's entry into NATO-aligned heavy weapons markets,' said Joshi.
BEL, through its JV with Thales, is supplying components for Rafale radars used in Europe, while Solar Industries is reportedly in talks to supply Pinaka rockets to France amidst ammunition shortages, Joshi added.
Tapse identified potential beneficiaries among Indian defence stocks, including Bharat Electronics (BEL) — which specialises in radar systems, communications, and electronic warfare — along with HAL, Bharat Dynamics (BDL), and Data Patterns (India), a niche player in defence electronics and embedded systems.
Doshi pointed to Data Patterns India, Zen Technologies, Paras Defence & Space Technologies, Astra Microwave Products, Ideaforge Technology, HAL, BEL and Bharat Dynamics as key stocks that may benefit from the rising global defence expenditure.
'Further, given the prevailing geopolitical tensions, increased defence spending, and the government's emphasis on indigenization and exports, the overall outlook on the defence sector remains positive,' she said.
According to Joshi, what's unfolding is a medium-term export supercycle for Indian defence firms—across public and private sectors, and across market caps.
'HAL, BEL, BDL, and Mishra Dhatu Nigam are backed by government credibility and global tie-ups, while private players like Bharat Forge, Solar, Data Patterns, and Dynamatic are showing product readiness and delivery capacity. Many already supply to NATO-aligned primes like Boeing, Airbus, and Lockheed Martin,' Joshi said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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