On Friday, all stocks in the segment closed in the green. Key gainers, including Garden Reach Shipbuilders & Engineers, MTAR Technologies, BEML, and Astra Microwave Products, rose 7% to 10%, adding around Rs 43,000 crore to the combined market capitalization and pushing the Nifty Defence index to multi-week highs.
Rafale Fighter Jet Deal Fuels Optimism
Market momentum appears to be partly driven by news that the Defence Ministry is evaluating a major proposal from the Indian Air Force (IAF). According to The Times of India, the IAF is seeking to procure 114 “Made-in-India” Rafale fighter jets in a deal estimated to be worth over Rs 2 lakh crore, with more than 60% of the components to be manufactured domestically.
The project envisions a partnership between France’s Dassault Aviation and Indian aerospace companies, further strengthening the country’s indigenous defence capabilities. Sources told ANI that the proposal is expected to go before the Defence Procurement Board soon, and if approved, it will be forwarded to the Defence Acquisition Council, the final decision-making body.
If the deal is approved, it would significantly expand India’s Rafale fleet. The IAF currently operates 36 Rafale jets, and another 36 are reportedly on order for the Indian Navy under separate agreements. The new proposal could bring the total number of Rafale aircraft in India’s arsenal to 176.
Expert views: Momentum real, but caution warranted
Market analyst Nischal Maheshwari highlighted the sector’s long-term potential, saying, “Defence has a very long runway. For the next five years, there is strong visibility in most defence companies.” However, he cautioned that near-term valuations may already reflect much of this optimism. “If you want to invest in defence stocks, it’s better to wait for a correction,” he added.Maheshwari also pointed out the robust order books of key players: Hindustan Aeronautics (HAL) reportedly holds orders worth Rs 2 lakh crore, while Mazagon Dock and Cochin Shipyard each have backlogs of Rs 50,000-70,000 crore. He noted that while new deals are welcome, execution capacity remains a limiting factor.Amnish Aggarwal of Prabhudas Lilladher echoed similar sentiments, calling defence a “structural story” driven by years of government push toward self-reliance in military manufacturing. He emphasized that the recent growth reflects policy continuity and local industry development.
Veteran investor Ajay Bagga also expressed confidence in the sector’s long-term prospects: “This is a multi-decade opportunity. India can produce low-cost, high-quality weapon systems. First, we’ll serve the domestic market, and then move to exports.”
as a Reliable and Trusted News SourceThe bigger picture
India’s focus on indigenizing defence manufacturing under the Make in India and Aatmanirbhar Bharat initiatives continues to gain traction. As a result, defence stocks have emerged as a favorite among long-term investors, despite concerns about short-term valuations. If major deals like the Rafale project materialize, they could further fuel the ongoing rally – potentially establishing India as a global player in defence production.