Top Defence stocks to benefit from ₹2.38 Lakh Cr Defence Acquisition Council approvals

Synopsis: Brokerages turn bullish on defence stocks after DAC approves Rs 2.38 lakh crore; HAL, BEL, and BDL top picks amid strong orders and growth opportunities.

The Defence Acquisition Council (DAC) is India’s apex body for defence procurement, chaired by the Union Defence Minister. It approves proposals for acquiring equipment, weapons, and systems across the Army, Navy, and Air Force, ensuring strategic capability upgrades and modernization.

DAC approvals unlock large-scale investments in defence infrastructure and technology. They boost domestic manufacturing, reduce import dependence through indigenization, and provide companies like HAL, BEL, and BDL with strong order visibility, supporting long-term growth and export opportunities.

DAC Approvals and Strategic Upgrades

The DAC, chaired by Union Defence Minister Rajnath Singh, sanctioned projects such as the S-400 missile system and Su-30 engine overhauls. In FY26, 55 proposals totaling Rs 6.73 lakh crore have received AoN, signaling continued investment in defence capability and long-term sector potential.

Brokerages Maintain Positive Outlook: Brokerages remain bullish on defence stocks after India’s Defence Acquisition Council approved proposals worth Rs 2.38 lakh crore. Bharat Electronics and other top picks are expected to benefit from the surge in orders, reflecting strong growth prospects across surveillance, combat, and long-range strike capabilities.

Orders Drive Domestic and Export Opportunities: Motilal Oswal highlighted that the approvals will be procured through both imports and indigenization, creating a sizeable addressable market for domestic players. Strong existing order books, combined with potential export opportunities, support incremental growth, while indigenization continues to reduce dependence on imported components.

Strategic Upgrades and Localisation Tailwinds: B&K Securities noted that the approvals enhance India’s airlift capability, strengthen layered air defence, and accelerate unmanned warfare adoption. The ‘Buy & Make’ structure signals medium-term localisation benefits, with FY26 approvals totaling Rs 9.28 lakh crore and capital procurement contracts at Rs 2.28 lakh crore, both record highs.

ICICI Securities, through Vikash Singh, remains constructive on India’s defence sector, driven by rising capital expenditure, growing exports, and evolving warfare dynamics. Select companies with strong positioning across missiles, electronics, and aerospace offer robust long-term growth visibility amid technology-driven defence requirements.

Key Stock Picks and Opportunities

ICICI Securities highlights Hindustan Aeronautics Limited, Bharat Electronics, and Bharat Dynamics as top picks, supported by improving valuations, strong order pipelines, and exposure to missiles, radars, and avionics. Ancillary players like PTC Industries, Mishra Dhatu Nigam, and Azad Engineering could benefit from localisation, outsourcing, and component manufacturing trends.

Macro Drivers and Growth Levers

ICICI Securities notes that India’s defence capital expenditure continues to grow steadily, while exports have risen from Rs 600 crore to Rs 23,000 crore over the past decade, targeting Rs 50,000 crore. Government-backed orders provide revenue stability, and expanding export and civil aviation opportunities are expected to diversify sector earnings further.

Defence stocks to be preferred by brokerages

Motilal Oswal expects Bharat Electronics (BEL) to benefit from the Indian Navy’s next-generation corvette program, valued at ~Rs 40,000 crore for eight ships. BEL will supply electronic suites and onboard defense systems, following initial orders to GRSE and Goa Shipyard, supporting near-term growth prospects.

Ratings and Price Targets

Motilal Oswal maintained its ‘Buy’ rating on BEL with a target of Rs 520, implying nearly 23.3 percent upside. Hindustan Aeronautics (HAL) also retains a ‘Buy’ with a Rs 5,500 target, indicating over 49 percent potential upside. Bharat Dynamics and Astra Microwave remain ‘Buy’, while Zen Technologies is rated ‘Neutral’.

Brokerages’ Views: B&K Securities echoes bullishness on HAL and BEL, maintaining ‘Buy’ ratings, but prefers a cautious stance on BDL with a ‘Hold’. These calls reflect strong sector fundamentals, strategic defense programs, and the long-term growth potential of technology-driven domestic and export orders.

ICICI Securities on Defense

ICICI Securities recommends ‘Buy’ for Hindustan Aeronautics (HAL) at Rs 5,300, Midhani at Rs 445, and an ‘Add’ on Bharat Electronics (BEL) at Rs 480, while Bharat Dynamics is rated ‘Reduce’ at Rs 1,401, reflecting selective opportunities in the sector.

Ancillary and Technology Players: Among ancillary and niche players, ICICI Securities rates PTC Industries (Rs 21,000), Solar Industries (Rs 17,200), Astra Microwave (Rs 1,200), and Azad Engineering (Rs 1,900) as ‘Buy’, Zen Technology as ‘Add’, and Dynamatic Tech (Rs 7,965) as ‘Sell’, highlighting potential in localisation and component manufacturing segments.

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