Defence stocks add ₹2.5-trn in m-cap in June quarter; more headroom left?

Analysts said that defence sector's long-term outlook remains constructive, supported by robust order books that provide multi-year revenue visibility.

Defence stocks: Stocks of defence-related companies added ₹2.5 trillion in market capitalisation to ₹12.47 trillion in the June 2026 quarter (Q1 FY27). While the Nifty India Defence index surged around 31 per cent during this period, as per ACE Equity data, individual stocks such as Paras Defence, MTAR Technologies, Astra Microwave Products, and Apollo Micro Systems zoomed more than 100 per cent each. 

 

In comparison, the Nifty 50 index surged nearly 7 per cent during the same three-month. 

 

After a small dip of 3.4 per cent in July, which also snapped its three-month winning streak, the Nifty India Defence index has logged a gain of nearly 4 per cent in August so far. 

Analysts said that the June quarter gains were supported by healthy order books and strong policy support. Besides, the geopolitical backdrop provided a structural tailwind, as the conflict in West Asia reinforced defence budget urgency across GCCs. 

 

 

In July, the decline in the Nifty India Defence index largely reflected profit booking after a stellar rally, analysys said, while noting that the index traded at a P/E multiple of nearly 56x, well above its five-year historical average of 44.9x, prompting investors to lock in gains. 

Long-term outlook constructive  Analysts said that the sector's long-term outlook remains constructive, supported by robust order books that provide multi-year revenue visibility. Government initiatives under Atmanirbhar Bharat, rising defence exports, and a sustained focus on indigenisation continue to strengthen the sector's structural growth story.  From an investment perspective, Ajit Mishra, SVP, research, Religare Broking, said that a staggered accumulation strategy appears more prudent than deploying capital through a lump-sum investment. "Long-term investors can use periods of market correction to gradually build positions in fundamentally strong companies with a proven execution track record, healthy order pipelines, and growing export opportunities," he said.  Policy tailwind  Analysts at ICICI Securities said that they maintain a positive stance on the defence sector. Government policies remain firmly supportive, evidenced by the MoD’s ₹3 trillion annual capital outlay target by CY29. This support implies a sustained double-digit CAGR in defence capex.

  Further, with the recent Defence Procurement Manual 2025, acquisition timelines are expected to be significantly compressed. Given that DAC approvals were at an all-time high in FY26 and continued in Q1FY27, the order awarding momentum is expected to pick up in FY27/28, especially in aerospace, missiles, electronic warfare and drone defence/offence side as the fabric of warfare has changed in the past couple of years.  "The long-term structural outlook for the defence sector remains firmly intact. Most listed defence companies continue to maintain strong order books, providing healthy revenue visibility and reinforcing confidence in the sector's long-term growth prospects," Sunny Agrawal, head of fundamental research at SBI Securities, said.   

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