The Indian government’s proposal to allocate an additional ₹50,000 crore to the defence sector, following the success of Operation Sindoor, is poised to significantly impact defence stocks in the week of May 19–23, 2025. This supplementary budget aims to enhance military capabilities through increased spending on weapons, ammunition, and technology.
India’s defence sector has recently witnessed a significant surge, with stocks like Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), Bharat Dynamics Limited (BDL), and Cochin Shipyard reaching new highs. This momentum is attributed to a combination of geopolitical developments, robust financial performances, and strong government support.

Key Drivers Behind the Surge

Government Initiatives and Export Potential
The Indian government’s push for self-reliance in defence manufacturing, under the ‘Make in India’ initiative, has led to increased investments and policy support for the sector. Additionally, India’s target of achieving $5 billion in annual defence exports by 2025 presents significant growth opportunities for domestic defence companies.

Geopolitical Tensions and Military Operations
The recent Operation Sindoor, a strategic military initiative by India, has heightened investor interest in defence stocks. The operation’s success showcased India’s military capabilities and underscored the importance of indigenous defence manufacturing. Consequently, the Nifty India Defence Index recorded a 10% increase over three days, with companies like IdeaForge, GRSE, Cochin Shipyard, and Bharat Dynamics experiencing substantial growth of up to 38% within a week.

Strong Financial Performances and Order Books
Defence companies have reported impressive quarterly results. For instance, GRSE’s net profit more than doubled to ₹224 crore in the March quarter, with revenue growing 62% year-on-year. Similarly, Cochin Shipyard reported a 27% jump in consolidated Q4 profit to ₹287.18 crore, with revenues rising 37%. These robust performances, coupled with expectations of a tripling of defence orders by FY27, have bolstered investor confidence.

Implications for Defence Stocks:

1. Boost in Capital Expenditure:
   The additional funds are expected to be directed towards capital expenditure, including the procurement of advanced weaponry and technology. This move is likely to benefit companies involved in defence manufacturing and supply.
2. Positive Market Sentiment:
   The announcement has already spurred investor optimism, with defence stocks rallying up to 8% in anticipation of increased military spending.
3. Enhanced Order Books:
   Companies such as Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), Bharat Dynamics Limited (BDL), and Cochin Shipyard are expected to see a surge in orders, bolstering their financial performance.
4. Support for Indigenous Manufacturing:
   The government’s focus on self-reliance in defence production aligns with the ‘Make in India’ initiative, potentially leading to long-term growth for domestic d

Given the current momentum, defence stocks are likely to maintain their upward trajectory in the upcoming week. The combination of geopolitical factors, strong financial results, and supportive government policies creates a conducive environment for continued growth. However, investors should remain cautious of potential market corrections due to the rapid appreciation of these stocks.