ICICI Securities has reiterated its positive stance on the Indian defence sector, forecasting sustained double-digit growth in defence capital expenditure. This optimism is fueled by consistent government support and a clear policy roadmap, according to a recent report by the brokerage.
The Ministry of Defence has set an ambitious annual capital outlay target of Rs 3 lakh crore by 2029. Coupled with the new Defence Procurement Manual 2025, acquisition timelines are expected to be significantly compressed, accelerating project execution and order flows. ICICI Securities highlighted that Defence Acquisition Council (DAC) approvals reached an all-time high in FY26 and continued strongly into Q1FY27, with Rs 52,000 crore worth of Acquisition on Necessity (AoN) approvals.
Preferred Stock Picks and Ratings
Among its top recommendations, ICICI Securities has given a 'BUY' rating to Hindustan Aeronautics Ltd (HAL) and Solar Industries India Ltd, identifying them as preferred stocks within the burgeoning defence landscape. The brokerage anticipates a surge in order awards during FY27 and FY28, particularly in aerospace, missiles, electronic warfare, and drone defence/offence systems, reflecting the evolving nature of modern warfare.
Further ratings include an 'Add' for Bharat Dynamics Ltd (BDL), Bharat Electronics Ltd (BEL), and Azad Engineering Ltd. Astra Microwave and Mishra Dhatu Nigam Ltd (MIDHANI) also received 'BUY' recommendations. Conversely, Dynamatic Technologies was rated 'Sell', while Zen Technologies Ltd was placed on 'Hold'.
Key Sector Developments
The geopolitical climate, particularly conflicts in the Middle East, is providing a structural tailwind, reinforcing the urgency of defence budget allocations across nations. Indian Original Equipment Manufacturers (OEMs) with established export track records are expected to benefit disproportionately, especially in areas like missiles, drones, aerospace, defence electronics, and radars.
- India's defence exports soared to $20.5 billion in FY26.
- The private defence sector now contributes 23% of total production.
- The Indian Navy may soon receive long-awaited submarine orders valued at Rs 70,000 crore.
Company-Specific Updates
- Hindustan Aeronautics Ltd (HAL): GE delivered its seventh F404 engine for the Tejas aircraft. HAL also issued a new tender to outsource Tejas Mk1A substructures and has an agreement with Safran for manufacturing alloy turbine ring forgings for LEAP engines.
- Bharat Electronics Ltd (BEL): Received cumulative orders worth Rs 1,400 crore. India and Indonesia have also agreed on various defence deals, including BrahMos and Astra MK1 systems.
- Astra Microwave Ltd: Secured orders for Uttam radar components from HAL.