India’s listed defence manufacturers and suppliers have been among the flavours of Samvat 2081, taking the Nifty Defence index higher by 26 percent on strong investor interest, and market experts believe this trend may continue to growth in the new Samvat as well.
During the same period, the benchmark Nifty 50 index rose by only 3 percent.
Amit Anwani, Vice-President of Equity Research at Prabhudas Lilladher said he expects Samvat 2082 to see continued momentum in defence names, with the sector’s earnings projected to grow at a CAGR of 13-15 percent over the next five years.
Samvat 2081 for defence shares was driven by geopolitical tensions as well as Centre’s support to encourage self-reliance in production. The war in Ukraine, geopolitical tensions in the Middle East, and India’s Operation Sindoor ensured domestic defence companies attracted investor attention, with rising order inflow. India, previously heavily import-reliant, now produces 65 percent of its defence equipment domestically, and aspires to move towards becoming a global export hub. Recent government initiatives such as the Defence Acquisition Procedure, liberalised FDI policy, and a 9.5 percent defence budget hike for 2025-26 have further supported the prospects for India's defence manufacturers.
Samvat 2082 Outlook
Looking ahead, at Prabhudas Lilladher’s Anwani said during Moneycontrol’s Special Diwali show - Fireworks and Fallout Themes: Samvat 2082 - that there is at least Rs 2.25 lakh crore worth of Approvals of Necessity (AoN) cleared or pending tenders with the Defence Ministry. Centre’s policy reforms over next 2-3 years are expected to generate more orders and provide sustained opportunities for domestic companies, said Prabhudas Lilladher.
As per company projections, HAL is expected to see a 15 percent plus CAGR in FY28 and FY29, while FY27 and this year could see 8-10 percent growth, picking up to 12-15 percent in later years as deliveries ramp up. Bharat Electronics could achieve 16-17 percent growth, BDL 15-20 percent, and GRSE is targetting to double revenue in 5-6 years, implying a 13-14 percent growth. Overall, the sector is likely to grow 13-15 percent CAGR over the next five years.
Drone stocks too gained attention during Samvat 2081 after Operation Sindoor demonstrated the Indian Army’s strategy of using a combination of conventional and advanced air defence systems. However, Amit Anwani said he expects the next 1–2 years to be quieter in this space, as India still imports large-scale drones from Israel, and domestic production is only beginning to scale up.
Anwani’s top picks for Samvat 2082 are HAL, which had corrected to Rs 3,500 per share last year and offers long-term value, and Bharat Electronics, which benefits from a strong order book and Centre’s make in India focus. According to Prabhudas Lilladher, these companies, along with select private players, are well-positioned to capture immediate and medium-term opportunities in India, as self-reliance and modernisation theme takes off.
Defence Stocks: Valuations still Tricky?
However, valuations of most of the defence plays remain high, with electronics companies trading at 40-50x FY27 earnings, private sector players at 50x, Bharat Electronics at 42x, and HAL at 32-33x. “We have to be selective where the value lies and where valuations may correct. FY27 valuations are expensive, and returns are possible but cautious selection is key,” Amit Anwani added.
In Samvat 2081, shares of HAL, Bharat Dynamics, Bharat Electronics, Data Patterns, Paras Defence have surged between 13-44 percent.
After a strong show in Samvat 2081, the outlook for defence stocks remains optimistic for Samvat 2082 as well, backed by government support, robust order book and India’s push toward self-reliance. For investors, this is a space of opportunity, but one that requires careful navigation amid rich valuations and evolving market dynamics.
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