Defence Stocks Rally Up to 9% on DAC's ₹2.12 Trillion Procurement Approvals

Defence stocks experienced significant gains in Tuesday's intraday trading, with some shares rising up to 9 per cent. This surge followed the Defence Acquisition Council's (DAC) approval of capital procurement proposals valued at approximately ₹2.12 trillion, which is set to expand the sector's existing order pipeline. The development reinvigorated investor interest, particularly after the defence sector had seen a 5.6 per cent decline in the preceding month.

The market response saw 21 out of 22 constituents of the Nifty India Defence index trading positively in early trade, propelling the sectoral index up by 2.8 per cent to reach 8,908. Among the top performers were Apollo Micro Systems, which climbed 8.7 per cent, Data Patterns with an 8.1 per cent increase, Paras Defence gaining 7.3 per cent, and Astra Micro Systems rising 5.9 per cent. MTAR Technologies shares were locked in the 5 per cent upper price band, while public sector undertakings like Midhani, HAL, BEL, BEML, and Mazagon Dock rallied between 3-4 per cent. Conversely, Aequs was the sole decliner, falling 19 per cent after reporting a wider loss of ₹52.2 crore in the second quarter of FY27, compared to a ₹20.6 crore loss in the same period last year, despite a 45 per cent year-on-year revenue growth.

The recently approved proposals cover all three defence services and include key programmes such as Light Multi Role Helicopters (LMRHs), Very Short-Range Air Defence System (VSHORADS), and the Long-Range Kamikaze Drone System. Antique Stock Broking, maintaining a constructive outlook on the defence sector, noted that these approvals further bolster the medium-term procurement pipeline for both public and private defence companies. They identified Hindustan Aeronautics (HAL) and Bharat Electronics (BEL) as key potential beneficiaries of the DAC's decision.

According to Antique, India's defence sector is positioned for a multi-year structural upcycle, driven by steady growth in budgeted capital expenditure from FY2026 to FY2030E. This trend is supported by a surge in acceptance of necessity (AON) approvals, with cumulative approvals reaching ₹18.9 trillion from FY2023 to year-to-date FY27, a significant increase from ₹9.2 trillion between FY2013 and FY2022. The push towards indigenization is also a crucial factor. However, sustained revenue growth will depend on the faster conversion of these AoNs into contracts and a consistently sizeable procurement pipeline. Antique currently holds 'BUY' ratings on HAL, BEL, Solar Industries, Astra Microwave, and Krishna Defence and Allied Industries.

What to watch: Track the conversion of defence approvals into concrete contracts for sustained growth.

Editor's note: The article uses the provided financial data and analyst commentary to create a well-structured market report.