India's Defence Sector Set for Decades of Growth

DAM Capital has begun covering India's defence sector, expecting multi-decade growth. The firm sees a fundamental shift from reliance on imports to self-sufficiency and increased exports, supported by strong government policies and higher budgets.

"With the government targeting ₹3 trillion in defence production and ₹50,000 crore in defence exports by financial year 2029, the sector offers significant visibility on scale, growth, and export potential, reinforcing the long-term investment case for India’s defence ecosystem," DAM Capital noted.

DAM Capital's Top Defence Stock Picks

DAM Capital assigned 'Buy' ratings to Astra Microwave Products (target ₹1,300), Bharat Dynamics (target ₹1,540), Bharat Electronics (target ₹530), Hindustan Aeronautics (target ₹6,300), Mishra Dhatu Nigam (target ₹430), and Zen Technologies (target ₹1,990). The firm is neutral on Garden Reach Shipbuilders & Engineers (₹2,660) and Mazagon Dock Shipbuilders (₹2,770).
Hindustan Aeronautics and Bharat Electronics are key picks among defence public-sector undertakings (DPSUs), with Astra Microwave Products and Solar Industries favored in the private sector.

₹15 Trillion Defence Opportunity Ahead

India's defence sector has a ₹15 trillion opportunity over the next five years, driven by steady defence spending and growing exports. Global geopolitical tensions are also a key factor boosting long-term growth. DAM Capital expects defence public sector companies to gain the most, with contracts potentially worth ₹6 trillion to be awarded in the next two years.

Budget Boost and Domestic Production Push

India's defence budget has grown steadily, with overall spending at an 8.5% CAGR and capital expenditure at a 10% CAGR since FY2020. The FY2027 budget included a 22% increase for defence, reaching ₹2.2 trillion. A major push for domestic production (indigenisation) is underway. The government is streamlining procurement with Defence Acquisition Procurement (DAP) 2020, easing foreign investment rules (FDI norms), and encouraging local sourcing. As a result, domestic procurement rose to 88% in FY2025 from 58% in FY2020, with foreign sourcing declining.

Defence Exports Soar Towards Ambitious Goals

India's defence exports have surged dramatically, reaching ₹38,420 crore in FY2026, up from ₹690 crore in FY2014. The government aims for ₹50,000 crore in defence exports by FY2029. Key export items include BrahMos missiles, Akash missiles, Pinaka rockets, and advanced radar systems, making India a notable global defence exporter.