BDL, GRSE, other defence stocks fall up to 14% as Budget 2026 misses expectations on capex outlay; index falls 9%

BDL, GRSE, other defence stocks fall up to 14% as Budget 2026 misses expectations on capex outlay; index falls 3%

• Defence stocks fell sharply after budget capex failed to meet expectations
• Nifty Defence index dropped nearly 9 percent amid broad market selloff
• Major defence firms like BDL, GRSE, and Paras Defence saw double-digit declines

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The shares of defence companies tumbled in trade on February 1 as Finance Minister Nirmala Sitharaman’s capex plans for the sector failed to meet analysts and industry’s expectations.

The Nifty Defence index crashed nearly 9 percent to 7,458.65, amid a sharp selloff in the overall market in the afternoon trading hours of Sunday.

What Nirmala Sitharaman said about defence capex:

While presenting Budget 2026, Finance Minister Nirmala Sitharaman pegged FY27 defence expenditure at Rs 5.94 lakh crore, up from Rs 5.68 lakh crore in FY26. Defence capital expenditure has increased 21 percent year-on-year, with the allocation for defence modernisation seeing a sharper 24 percent rise over last year.

Investors had expected a strong jump in defence budget, especially as an aftermath to Operation Sindoor which the Indian military forces conducted over targeted military outfits in Pakistan and Pakistan-occupied-Kashmir last year.

Defence stocks:

Bharat Dynamics (BDL) shares crashed nearly 10 percent to trade at Rs 1,384.4 apiece, while Garden Reach Shipbuilders & Engineers (GRSE) and Data Patterns (India) shares declined nearly 14 percent. Paras Defence shares fell 12 percent.

Mazagon Dock Shipbuilders, Hindustan Aeronautics (HAL), Cochin Shipyard and Bharat Electronics (BEL) shares also fell around 10 percent each, while BEML shares fell nearly 11 percent.

What experts say:

Beyond immediate security needs, capital-led defence spending has a powerful economic multiplier—supporting indigenous manufacturing, technology development and skilled employment, said Varun Gupta, CEO, Groww Mutual Fund.

"A sustained shift towards domestically sourced defence capital can strengthen India’s strategic autonomy while creating durable growth opportunities across the broader industrial ecosystem," he said.

“Budget 2026 lays down an ambitious roadmap for India’s manufacturing sector, anchored by a record ₹12.2 trillion infrastructure capex and a clear strategy to expand manufacturing’s share of GDP. The enhanced focus on structural reforms, revitalising legacy industries and scaling advanced sectors signals a shift from incremental support to broad-based capacity building and competitiveness," said Jaikaran Chandock, Director, Balu Forge Industries.

He added that the allocation of Rs 5.95 lakh crore to the defence sector for defence research, land systems and equipment further strengthens the manufacturing outlook, particularly for precision engineering and high-value domestic production.

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