Top Defence Sector Stocks to Watch in India for 2024

Defence is crucial for protecting a country from internal and external threats, making it an essential institution. As a developing economy, India is focused on upgrading its defence capabilities to become self-sufficient and modern. With the world’s second-largest army, India has the robust defence capability to protect its borders and citizens. The Indian defence sector covers a wide range of areas, including aerospace, land, and naval systems, with numerous public and private companies contributing to manufacturing defence equipment and supplies. This article will explore the defence stocks list with prices, provide an overview of best defence sector stocks in India and explain how to invest in them.

List of the Top Defence Stocks in India (2024)

Here’s a detailed defence stocks list with price, market capitalisation, and key financials of the top 9 defence stocks in India:

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: This list of defence stocks was generated on 15th October, 2024 and is subject to real time updates. This data is derived from Tickertape Stock Screener.

🚀 Pro Tip: You can use Tickertape’s Stock Screener to research and evaluate stocks with over 200+ filters and parameters.

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Top 5 Defence Stocks in India: An Overview

Here are brief overviews of the top listed defence companies in India listed above:

Hindustan Aeronautics Ltd

One of the leading defence companies in India, Hindustan Aeronautics Limited (HAL) is an Indian public-sector aerospace and defence company. Established on 23rd December 1940, it is one of the world’s oldest and largest manufacturers. 

Sika Interplant Systems Ltd

Among the top 10 defence stocks in India, this Indian defence stock is a technology-focused company listed on the Stock Exchange. It specialises in the aerospace and defence sector and offers engineering, manufacturing solutions, project and systems integration, MRO, and distribution services. 

Bharat Dynamics Ltd

Bharat Dynamics Limited (BDL), established in Hyderabad in 1970, is one of India’s key manufacturers of ammunition and missile systems. Initially, BDL developed in-house R&D capabilities, focusing on design and engineering activities while continuing to manufacture weapon systems. 

Taneja Aerospace and Aviation Ltd

One of the most prominent defence companies in India, Taneja Aerospace and Aviation Ltd (TAAL) manufactures and supplies aerostructure composite parts, structures, and assemblies. TAAL also designs and builds airfield infrastructure..

Paras Defence and Space Technologies Ltd

Specialising in aerospace structures and assemblies, this company’s share performance makes it one of the top 10 defence stocks in India to watch. Paras Defence And Space Technologies Ltd. leads in the defence and space technology sector, focusing on innovative solutions and advanced technologies for defence, aerospace, and space exploration. 

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1. Quantance Defence Stars smallcase: This smallcase, managed by Quantance Research, is a concentrated treasure basket of 3-15 stocks selected from NIFTY Defence Universe.

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2. smartvalues – defense smallcase: This smallcase, managed by Lamron Analysts, is a portfolio of five stocks from the defence sector.

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• Disclosure for the Quantace Defence Stars smallcase. 
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What are Defence Stocks in India?

Defence stocks are shares in defence sector companies in India that produce, develop, and distribute military equipment, technology, and services. Investing in India defence sector stocks list allows investors to engage in industries essential for national security. 

Indian Defence Sector – Overview

India ranks fourth globally in defence spending, with a budget of approximately $74.7 billion. Defence exports for the financial year 2023-1024 reached Rs. 21,083 cr. (about $2.63 billion), a 32.5% increase from the previous year. 

• Government Initiatives: The Atmanirbhar Bharat initiative has boosted indigenous manufacturing, contributing to a defence production value of over $15 billion in 2023- 2024.
• Budget Allocation: The Union Budget for 2024-25 allocates Rs. 6.22 lakh crore for defence, with capital spending rising by 9.4% to Rs. 1.72 lakh crore.
• Market Performance: The Nifty India Defence index surged 142% over the past year as of late October 2024, indicating strong investor confidence.

India aims for a turnover of $26 billion in aerospace and defence manufacturing by 2025, supported by infrastructure developments and public-private partnerships.

How to Invest in the Best Defence Stocks in India?

Research and analysis are crucial to investing in the best defence stocks in India. Identify key players through the defence stocks list with price and understand government policies, which can impact the growth of Indian defence companies. Monitoring investments and keeping track of the defence shares list in India will help in making informed decisions.

Investors can choose India defence stocks, ETFs or mutual funds to invest in the defence industry. To invest in the best defence sector stocks list in India, consider the following steps:

1. Research and analysis: Investors should conduct thorough research and analysis of the top defence stocks India, market conditions, and the government’s defence policies and initiatives that can impact the Indian best defence share growth.
2. Selecting the right stocks: Investors can use stock screeners to identify defence stocks share price and potential investment opportunities in the defence sector. For example, investors can utilise the Tickertape Stocks Screener to find a defence share list: select ‘Aerospace and Defence Equipments’ under ‘Sector’ and sort the stock according to preferred parameters like market cap, 5-Yr CAGR, net profit, return on equity, etc.
3. Monitoring investments: It is essential to monitor the government’s defence policies and initiatives, which can impact the growth of defence shares, and exit the investment when necessary.

Implications of the Union Budget 2024-2025 on the Defence Sector

Finance Minister Nirmala Sitharaman announced an allocation of Rs. 4.54 lakh cr. for the defence segment in the Union Budget 2024, reducing it from the Rs. 6.21 lakh cr. allocated in the Interim Budget.

Total Defence Budget

The total allocation for the Ministry of Defence budget is Rs. 6.22 lakh cr., which includes Rs. 1.41 lakh cr. for defence pensions. This represents a 4.79% increase from the previous fiscal’s allocation of Rs. 5.94 lakh cr. The defence budget accounts for approximately 12.9% of the total budget outlay for 2024-25.

Comparison to Previous Budgets

The defence budget has seen a 44% increase from the 2019-20 fiscal year. Additionally, it has increased by 171% from the Rs. 2.29 lakh crore allocated in the 2014-15 fiscal year.

Modernisation Budget

The budget for military modernisation stands at Rs. 1.72 lakh cr., which is a 6% increase from the Rs. 1.62 lakh cr. allocated in the previous fiscal year.

Budgetary Norms

Unlike previous years, the individual capital budgetary allocations for the Army, Navy, and Air Force were not made public. This change aims to foster jointness among the services by consolidating their demands into similar expenditure categories.

Capital Budget

The limited hike in the capital budget is attributed to fewer new contracts signed by the Armed Forces and slippages in scheduled payments and deliveries. The revised estimates for the capital budget in 2023-24 were Rs. 1.57 lakh cr., which is lower than the allocated Rs. 1.62 lakh cr.

Revenue Budget

The overall revenue budget for defence is Rs. 2.82 lakh cr. This includes pay and allowances for the Armed Forces, as well as allocations for fuel, ammunition, and maintenance of assets. The revenue expenditure, excluding salary, stands at Rs. 92,088 cr. Additionally, over Rs. 6,000 cr. has been allocated towards the Agnipath scheme.

Innovation and Development

An additional allocation of Rs. 400 cr. has been made for the ADITI scheme, which engages start-ups and MSMEs to develop innovative defence technologies for the Indian military.

Projects and Procurement

The budget will fund the modernisation of the Su-30 fleet, the procurement of additional aircraft, advanced engines for existing MiG-29s, transport aircraft C-295, and missile systems. Navy projects, such as the acquisition of deck-based fighter aircraft, submarines, and next-generation survey vessels, will also be supported.

Border Infrastructure

The Border Roads Organisation’s budget has been increased by 30% to Rs. 6,500 cr. This will fund projects like the development of Nyoma Airfield in Ladakh, permanent bridge connectivity in the Andaman and Nicobar Islands, the Shinku La tunnel in Himachal Pradesh, and the Nechiphu tunnel in Arunachal Pradesh.

Indian Coast Guard

The allocation for the Indian Coast Guard is Rs. 7,651.8 cr., which is a 6.31% increase from the previous fiscal year. Of this, Rs. 3,500 cr. will be spent on capital expenditures, including the acquisition of fast-moving patrolling vehicles, advanced electronic surveillance systems, and weapons.

Ex-Servicemen Welfare Scheme

The total allocation for the Ex-Servicemen Welfare Scheme is Rs. 6,968 cr., representing a 28% increase from the previous fiscal year.

Defence Research and Development Organisation

The budget for the Defence Research and Development Organisation has been increased to Rs. 23,855 cr. from Rs. 23,263.89 cr. in the previous fiscal year.

Key Features of Indian Defence Sector Stocks in India

The key features of Indian defence stocks are as follows:

Government Backing and Policy Support

Defence companies in India share market, including top private defence companies in India receive significant support from government policies, underscoring their strategic importance to national security. Initiatives like “Make in India” have bolstered self-reliance in defence manufacturing, fostering substantial investments. The government has also relaxed FDI norms, allowing up to 74% FDI through the automatic route to entice foreign expertise and technology enhancements in defence sectors.

High Entry Barriers

The Indian defence sector stocks are characterised by high entry barriers due to stringent regulatory requirements and the need for heavy capital investment. Companies entering this field must navigate a complex array of approvals and comply with national security standards, which deter new entrants. Moreover, the industry’s nature demands substantial upfront investment in high-cost machinery and R&D facilities, making it a capital-intensive endeavour.

Partnerships and Joint Ventures

Strategic partnerships are crucial in the Indian defence sector, facilitating technology transfer and collaborative production efforts. These alliances often involve tying up with leading global defence firms, which helps domestic companies integrate cutting-edge technologies and improve their product offerings. The Government of India also promotes public-private partnerships (PPP) to leverage the strengths of both public enterprises and private sector innovation, particularly through collaborations with organisations like DRDO.

Research and Development (R&D) Intensity

Defence stocks in India rely heavily on continuous innovation, necessitating significant R&D investment. The Indian government supports R&D initiatives through grants and incentives, aiming to foster the development of indigenous defence technologies and reduce dependence on imports. This focus on innovation helps build a technologically advanced defence portfolio and supports the long-term sustainability of defence firms.

Cyclical and Long-term Contracts

Defence contracts are typically long-term and cyclical, reflecting the extended production cycles required to manufacture sophisticated defence equipment. Given the lengthy nature of defence projects from inception to delivery, these contracts provide a stable and predictable revenue stream over several years. The assurance of sustained demand under these multi-year agreements allows companies to plan their production and investment cycles more effectively.

Export Potentials

Indian defence companies are increasingly looking to expand their footprint in the international markets. Supported by the government’s Defence Export Strategy, India’s defence sector is strongly pushing to enhance its export capabilities. This strategy opens up new markets and provides Indian companies with a competitive edge internationally, promoting high-quality and cost-effective defence products on a global scale.

Risk Factors

Investing in defence stocks entails navigating several risk factors, including geopolitical influences and budget constraints. Geopolitical tensions can lead to abrupt changes in defence policies and priorities, while budgetary limitations may affect the funding for defence projects. These factors require investors to stay informed about global political dynamics and fiscal policies that could impact the sector.

Stock Volatility and Performance

Defence stocks can exhibit high volatility, influenced by various factors, including government defence spending, geopolitical crises, and policy changes. Their performance is closely tied to national defence budgets and the global defence environment. Investors must be cognizant of these dynamics, which can significantly affect stock prices and overall sector performance.

Why Invest in the Top 10 Defence Stocks in India?

Investing in defence shares in India offers security due to consistent demand, government backing, and long-term contracts. The Indian government’s push for indigenous defence manufacturing can be anticipated to boost the demand for defence equipment and supplies. Consequently, defence shares in India might be more likely to see a significant increase in demand, leading to a potential rise in their stock prices.  Understanding the defence stocks list with price and monitoring the performance of defence sector shares can help investors make the best choices.

Investors can consider investing in defence PSU stocks in India by conducting thorough research and analysis of the company’s financials, growth potential, and market conditions. It is essential to monitor the government’s defence policies and initiatives that can impact the growth of defence shares and the demand for defence-related stocks.

How to Select the Best Defence Stocks to Buy in India?

Tracking the defence stocks share price is crucial for investors who want to capitalize on short-term fluctuations or hold for long-term growth. Investors need to consider the following aspects and conduct further research by consulting financial advisors to select the best defence stock in India for their portfolio:

1. Financial performance:  Analyse the financial performance of defence sector companies, including revenue growth, profitability, and debt levels, to provide insights into the financial health of a company and its ability to generate returns for investors.
2. Technological advancements: Investors should monitor technological advancements in the defence sector. Companies investing in research and development and staying at the forefront of innovation will likely have a competitive advantage.
3. Government contracts: Government policies and contracts heavily influence the defence industry. Investors should stay informed about any changes in government regulations and track the awarding of defence contracts to individual companies.

Risks Associated With Investing in Defence Stocks in India

Here are a few risks that may be associated with investing in defence stocks in India: 

• Dependence on Government Budgets: Defence spending fluctuates with political and economic changes, affecting company performance.
• Ethical Considerations: Some investors may be concerned about supporting the military-industrial complex.
• Cyclical Performance: Defence stocks can underperform during long periods of peace due to shifting government spending priorities.

Future of Defence Stocks and Defence Industry in India

The best defence stocks in India are poised to benefit from increased military spending and the expansion of the defence company in the Indian export market. By 2025, the Ministry of Defence aims for a $26 bn turnover in aerospace and defence manufacturing, including $5 bn in exports. 

Several parameters contribute to the positive outlook for defence related stocks in India:

Domestic demand

The demand for defence equipment and services within India is expected to remain robust, driven by factors such as changing geopolitical scenarios. For instance, the increasing regional tensions have led to a higher demand for defence equipment. Other factors driving the demand include the need to replace obsolete equipment, internal security requirements, economic growth, and the entry of new defence companies in Indian stock market. 

Government support

The Indian government is pivotal in promoting self-reliance and indigenous production in the defence sector. For instance, it has launched the ‘Make in India’ initiative, which encourages domestic production of defence equipment, and the ‘Defence Procurement Procedure 2020 ‘, which prioritises indigenous suppliers. This proactive stance is expected to significantly benefit domestic defence listed companies in India, providing a stable and conducive environment for investment.

Export potential

India’s attractive position in the global defence market presents a significant opportunity. With its potential to become a major exporter of defence equipment and services, particularly in engineering services and component sourcing, the industry’s growth prospects are promising, fostering optimism among potential investors.

While Indian defence sector stocks in India present a secure investment choice, investors must conduct thorough research and analysis. Understanding each individual defence stocks in the defence shares list in India and their growth potential is key to making informed investment decisions, ensuring investors feel prepared and confident in their choices.

Factors to Consider While Investing in the Best Defence Stocks in India

When venturing into investments within India’s defence sector, several crucial factors warrant careful consideration. 

• Technological Advancements: With technological advancements, the defence company stocks in India are rapidly modernising. Investors should focus on defence company stocks that invest in research and development. 
• Geopolitical Risks: Defence related stocks India are susceptible to geopolitical risks, and investors should be aware of such risks while investing in Indian defence manufacturing stocks. Factors such as border tensions, conflicts, and government policy changes can significantly impact India’s defence stocks NSE. 
• Government Policies and Regulations: The Indian government plays a significant role in the defence industries and significantly impacts defence stocks in India. Investors should closely monitor government policies and regulations related to defence procurement, licensing, and foreign direct investment (FDI). 
• Defence Budget: The defence budget is a critical factor that investors in defence stocks in India should consider when selecting the top stocks in the defence sector. Thus, the Indian government has been increasing the defence export budget yearly.

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To Wrap It Up…

The Indian defence industry is critical in strengthening the country’s national security and promoting self-reliance in defence production. India boasts the world’s second-largest standing army. However, it also faces a volatile geopolitical climate, necessitating strong defence capabilities to safeguard its borders and citizens. Investors can also explore smallcases that invest in defence stock portfolios. For example, the Quantance Defence Stars smallcase, managed by Quantance Research.  

Frequently Asked Questions on Defence Stocks in India