The Indian defence manufacturing sector has been growing at a scorching pace, thanks to the increase in defence spending and initiatives such as Make in India. Among the best defence stocks in India are organizations like Bharat Electronics Limited (BEL), Hindustan Aeronautics Limited (HAL), and Bharat Dynamics Limited (BDL).
Many of these Indian defence companies manufacture complex defence hardware, such as fighter jets, radar systems, and missile systems. Solid order books, government support, and the chance of long-haul development bode well for these defence stocks in India.
Defence industry in India: A brief overview
As stated above, the defence sector in India has witnessed scorching growth in the recent years. The “Make in India” initiative has given a fresh impetus to the sector, which is expected to boost domestic manufacturing and reduce reliance on imports. Bharat Electronics Limited (BEL), Hindustan Aeronautics Limited (HAL), and Bharat Dynamics Limited (BDL) are among the best defence stocks in India. These firms have experience in manufacturing cutting-edge military hardware, like missiles, aircraft, and radar systems, which can boost India’s defence capabilities.
The defence Procurement Procedure (DPP) and other government policies, such as higher FDI limits, have also supported the development of the sector. With solid order books and government support driving long-haul development prospects, the defence sector has attracted significant investments. The significance of the sector in the domestic and global defence landscape is known from investor interest in the best defence stocks in India.
Best defence stocks in India 2024 as per analysis
We have listed the top 10 defence stocks in India below:
1. Bharat Electronics Limited (BEL):
Known for its strong order book and strategic collaborations, BEL continues to be a leading firm in India’s defence electronics market. Analysts like BEL for its consistent performance and mechanical improvements in radar and communication systems.
2. Hindustan Aeronautics Limited (HAL) :
HAL’s capabilities in aerospace technology, engines for aircraft and helicopters, and military and civilian aircraft give it an edge. Its market position is fortified by its strong government partnerships and different product offerings.
3. Bharat Dynamics Limited (BDL):
Specializing in rocket systems and strategic weapons, Bharat Dynamics Limited (BDL) is known for its role in India’s defence preparedness and its modernization projects.
4. Astra Microwave Products Ltd.:
Communications equipment maker Astra Microwave is notable for its expert assets in microwave radio frequency systems and subsystems. It is a promising stock in the sector as it manufactures defence communication systems and electronic warfare equipment.
5. Walchandnagar Industries Ltd.:
Walchandnagar Industries, a heavy engineering company, has a long history in the defence industry and is notable for its rocket systems and aerospace parts, not to mention its defence manufacturing capabilities.
6. Larsen and Toubro (L&T):
The company’s defence arm has made traction with its expanded portfolio of offerings that include naval systems, artillery, and strategic electronics. Its extensive infrastructure projects and superior engineering capabilities support its defence activities.
7. Ashok Leyland Ltd:
A commercial vehicles manufacturer known for its buses and heavy-duty trucks, Ashok Leyland has made significant headway in manufacturing defence products including armored, high mobility, light tactical, logistics, simulator, and tracked vehicles. Analysts point to its potential for international collaborations and defence mobility solutions.
8. Cochin Shipyard Ltd:
Leading shipbuilding and maintenance facility Cochin Shipyard Ltd is integral to India’s naval defence. The defence stock is favored given its expertise in building submarines and warships.
9. Azad Engineering:
The aerospace components and turbine maker competes with manufacturers from Europe, China, Japan, and the US. The company caters to the aerospace and defence industries, not to mention energy and oil and gas sectors. The company went public on Dec. 28, 2023 at a price of Rs. 677 per share.
10. Zen Technologies:
The defence equipment maker manufactures anti-drone systems and training simulators for armed forces and government departments. The firm, in association with its unit AI Turing Technologies, launched AI-powered products and robots for the global defence market.
Top defence stocks in India in 2024 by market capitalization
We have listed the top defence stocks in India in 2024, ranked by market capitalization.
1. Hindustan Aeronautics Limited (HAL):
India is on a mission to become self-reliant in defence manufacturing and HAL is India’s best bet in manufacturing defence aircraft and helicopters. HAL has a strong order book, with orders from the Indian Airforce, and Indian Navy, and also from countries such as Malaysia. This makes HAL a sound bet for long-term investment. HAL has a market cap of Rs. 332,983 crore.
2. Bharat Electronics Limited (BEL):
Bharat Electronics Ltd. (BEL) is involved in defence manufacturing and is known for its presence in the semiconductor chips business. BEL manufactures radars and other essential components for ships and aircraft. The Bangalore-based firm has a market capitalization of Rs. 233,839 crore as of July 30, 2024.
3. Bharat Dynamics Limited (BDL):
BDL manufactures missile systems and strategic weapons, which is fundamental to reinforcing India’s defence capabilities. Its market capitalization is Rs. 54,119 crore.
4. Larsen and Toubro (L&T):
Infrastructure major L&T also has a significant presence in defence manufacturing. The firm leverages in-house technology, manufacturing, and product development capabilities to make multi-disciplinary weapons systems for naval and land-based platforms. L&T has a market cap of Rs. 532,220 crore.
5. Zen Technologies:
Zen Technologies Ltd., established in 1993, designs, develops, and manufactures combat training solutions for training of defence and security forces worldwide. Zen Technologies has a market cap of Rs. 14, 067 crores.
Overview of the best defence stocks in India as per market capitalization
The top defence stocks in India signal the growing importance of the sector. Though India is still dependent on countries such as Russia and France for acquiring most of its defence equipment, the change in government policy encouraging indigenous defence manufacturing has given a fillip to the industry. To be sure, India has an impressive line-up of defence manufacturing firms like HAL, BEL, and BDL and newer players such as Azad Engineering and Zen Technologies.
These organizations are vital to India’s objective of becoming independent in defence production, thanks to government initiatives like “Make in India.” Their huge market capitalization reflects their solid standing in the defence sector. As these firms extend their capabilities, these top defence stocks seem to have captured the imagination of Indian investors.
Factors to consider before investing in defence stocks in India
It is important to consider few factors before investing in defence stocks in India. We have discussed some of them below.
Financial performance
One should assess the financials of these defence firms. Look out for revenue growth, profitability margins, and cash flow. As key indicators of revenue perceivability and functional effectiveness in the defence sector, examine order books and acquisitions.
Technological advancements
Technological knowhow is pivotal to the defence sector. Companies which spend on research and development (R&D) to make innovations gain the upper hand. To assess an organization’s standing in the market and future growth prospects, it is vital to assess its technological capabilities and its capacity to adapt to changing defence requirements.
Government policies
Government policies have an outsized influence on the defence sector. Projects like “Make in India” give a boost to domestic defence manufacturing. Changes in defence procurement rules, budget allocations, and regulatory systems impact the business climate for defence stocks.
Geopolitical developments
The global geopolitical situation influences the defence sector. Strained bilateral relations and defence cooperation impact the defence budgets of nations.
Should you invest in defence stocks?
Investing in defence stocks is a strategic decision for investors. Hence, it is important to weigh numerous factors before making your choice.
1. Sector dynamics:
Government contracts, geopolitical tensions, and technological advancements all impact the defence industry. Organizations connected to government contracts and those with a solid order pipeline could be good options to consider. Regulatory changes and fluctuations in defence budgets can also impact stock performance.
2. Risk and instability:
Due to geopolitical and regulatory changes, defence stocks might experience higher unpredictability than other sectors. Before investing in defence stocks, investors should assess their risk tolerance and diversification plans.
3. Long-term growth potential:
Defence organizations often operate in narrow markets with strong entry barriers. Technological advancements and defence system development can boost long-term growth. It is fundamental to survey an organization’s growth prospects by examining its R&D investments and market standing.
4. Ethical considerations:
Given the nature of the industry, a few investors might have ethical questions about purchasing defence stocks. While pursuing investment choices, it is crucial to know about the organization’s strategic policies and alignment with personal values.
