A couple of brokerages are bullish on select defence stocks including Bharat Electronics Ltd (BEL), Hindustan Aeronautics Ltd (HAL) and Data Patterns (India) Ltd, as they believe the sector stands out as a compelling investment theme, offering multiple growth levers and strong visibility.
Nuvama said 2025 will be a pivotal year for India, given orders for some larger programs such as QRSAM, P-75I, LCA Mark1A and Pinaka are likely. It believes the industry may grow steadily with a skew towards Air Force and Navy. Supply chains, meanwhile, remain the key variable amid global uncertainty unfolding in Bangladesh, Syria and now Korea, on top of Russia-Ukraine and Middle East, it said.
The brokerage believes the India-US defence co-operation may improve under the Trump administration.
"In the backdrop, recent stock price correction across the defence pack is a chance to make a lunge given a mounting growth story over and above the already known GoI’s ambitious targets of Rs 50,000 crore in defence exports and Rs 3 lakh crore in defence production by 2030. We particularly prefer the sub-segment Defence Electronics," it said.
PhillipCapital said it maintained a positive outlook on the defence sector, favouring stocks with favourable risk-reward profiles such as BEL, HAL and Data Patterns.
PhillipCapital said BEL leads the niche defence-electronics space, with 60 per cent market share. It assigned a PE of 42 times based on December 2026 EPS and initiate coverage with a 'BUY' rating and a target of Rs 390. For HAL, it said a near-term catalyst is the induction of HAL’s LCA Mk1A (Light Combat Aircraft Mark 1A) into the Indian Air Force (IAF). It assigned a PE of 40 times on December 2026 EPS, we initiate coverage with a 'Buy' rating and a target of Rs 5,500.
Data Patterns, it said, stands out as a vertically integrated player in the defence and aerospace electronics space, leveraging its in-house design and development expertise. It initiated coverage on the stock with a 'Buy' rating and a target price of Rs 3,400.
It is neutral on Solar Industries (target: Rs 12,000) and Bharat Dynamics Ltd (Rs 1,400).
"We stay optimistic on India Defence space with key catalysts at play: i) Huge localisation push to reduce dependence on disrupted global supply chains. ii) Continued modernisation efforts with larger programs coming ahead of expected timelines. Top picks: BEL, DATA Patterns (NR)," Nuvama said.