In a post on microblogging site X, formerly Twitter, the market expert said that growth prospects are looking ‘solid’ for the next 5-10 years.
Gurmeet Chadha highlighted a detailed speech by the US Under Secretary of War during his India visit as a key read, pointing to strengthening defence ties. Drawing from his recent visits to defence corridors, including Nagpur, and interactions with management teams, he observed a rise in enquiries from US-based entities. He added that defence cooperation and manufacturing are likely to see an uptick.
While the escalation of the Iran-Israel, US conflict was expected to trigger strong gains in defence stocks, the sector has delivered a mixed performance, defying initial expectations even as the war enters its third week. Despite rising economic uncertainty and elevated energy prices keeping global markets on edge, analysts believe the current geopolitical backdrop continues to offer a constructive long-term outlook for the defence space.
Earlier this month, domestic brokerage firm Motilal Oswal suggested that defence stocks are well-positioned and could deliver returns of up to 52%, as the current conflict in the Middle East is likely to drive higher global defence spending, with nations prioritising security and military preparedness.
Hindustan Aeronautics (Buy call), involved in combat aircraft manufacturing, offers one of the highest upside potentials among the four stocks. With a CMP of Rs 3,669 and a target price of Rs 5,500, the stock implies a potential upside of about 49%. Bharat Dynamics (Buy call) also shows strong return potential, with its target of Rs 1,800 indicating an upside of roughly 52% from the CMP of Rs 1,336.
Meanwhile, Bharat Electronics, currently trading at Rs 458, has a target price of Rs 520, suggesting a more modest upside of around 26%. Astra Microwave Products also offers moderate gains, with a CMP of Rs 1,008 and a target of Rs 1,150, translating into an upside potential of about 25%.Escalating geopolitical tensions in the Middle East could drive a surge in global defence spending and demand for military equipment such as missiles, air-defence systems, surveillance technologies, and electronic warfare solutions, analysts added. In FY25, the Middle East accounted for 26% of total global arms imports, and this could increase further, thereby opening up opportunities for domestic defence companies to capture this market.
Additionally, the earlier NATO directive to member nations to increase defence capex allocation, along with higher budgetary allocation for defence by the Indian government, bodes well for increasing the TAM for domestic defence companies. “We expect companies like Bharat Electronics, Bharat Dynamics, Solar Industries, Astra Microwave and Zen to benefit from a higher TAM.”
The Union Budget increased the capital outlay on defence by 18% YoY to Rs 2.2 lakh crore in FY27BE. This increase is important as it provides the necessary funding visibility to support the large pipeline of Acceptance of Necessity (AoN) approvals cleared YTD in FY26. So far, AoNs worth over Rs 7 lakh crore have been approved across multiple platforms and systems, creating a strong procurement pipeline for the domestic defence industry.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)