ICICI Securities forecasts double-digit growth in India's defence spending through 2030, supported by the new 2025 procurement manual. The brokerage has assigned 'Buy' ratings to Hindustan Aeronautics and Solar Industries, highlighting them as key beneficiaries of rising missile and drone demand.
ICICI Securities has maintained a positive outlook for the Indian defence sector, anticipating that capital expenditure will sustain double-digit annual growth through 2030. This optimism is primarily driven by structural reforms, including the Defence Procurement Manual (DPM) 2025, which is designed to speed up acquisition timelines and encourage domestic manufacturing participation.
Order Momentum and Policy Catalysts
The brokerage points to robust order inflows as a key indicator of sector health. According to recent data, the Defence Acquisition Council recorded significant Acceptance of Necessity (AoN) approvals in the first quarter of fiscal year 2027, with the momentum expected to strengthen throughout FY27 and FY28. This growth is being fueled by an evolving global security environment, which has increased demand for electronic warfare, missile technology, and sophisticated drone systems.
Top Picks and Performance Context
Among the companies in the sector, Hindustan Aeronautics (HAL) and Solar Industries have received 'Buy' ratings from the brokerage.
Investors have monitored these companies closely due to their strong operational performance. HAL shares saw a positive move of over 2% on September 4, 2026, following news regarding the delivery of GE Aerospace F404-IN20 engines for the LCA Tejas programme. Meanwhile, Solar Industries has demonstrated strong financial growth, reporting net sales of Rs 3,668 crore in the first quarter of FY27—a 70.3% increase compared to the same period last year—with an EBITDA margin of 27.7%.
Other companies in the sector received mixed reviews. While the brokerage maintains an 'Add' rating for Bharat Electronics, Bharat Dynamics, and Azad Engineering, it has assigned a 'Reduce' rating to Dynamatic Technologies, citing valuation concerns relative to the broader sector's projected performance.
Sector Risks and Monitorables
While the growth outlook is positive, the sector faces specific challenges that investors should monitor. India remains heavily dependent on imports for various critical defence technologies, which can impact profitability and supply timelines. Additionally, while the private sector is seeing more opportunities, the industry is still dominated by established public sector undertakings, and the shift toward private participation in high-end research and development is an ongoing process.
Execution risk also remains a critical factor. For instance, the timely supply of essential components, such as engines for major aircraft platforms, is vital for companies like HAL to meet their order delivery schedules. Investors will likely track upcoming budgetary allocations, the actual implementation of the DPM 2025, and order execution progress as primary indicators of the sector's long-term sustainability.