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Global conflicts could increase in the future, which may provide an opportunity for defence equipment manufacturers and solutions providers
As humanity shifts to a multipolar world order, there are risks of new conflicts arising among several countries. We are already seeing conflicts in the Middle East, Russia-Ukraine, etc. More conflict zones could emerge in the future, as countries seek to take control of resources and expand their influence.
Rising global conflicts will significantly increase the demand for defence equipment, software and services. Such developments can be beneficial for defence equipment manufacturers. To know if you should invest in defence stocks, here are some important aspects to consider.
Mega defence modernization program
Faced with neighbors that have already waged multiple wars, India is seeking rapid modernization of its defence forces and assets. While importing advanced weapon systems, the government is also focusing on self-reliance and bolstering domestic manufacturing. Defence budget for 2024-25 is around Rs 6.22 lakh crore, which is quite massive.
A significant percentage of this budget will be allocated for acquiring weapons and capabilities from local manufacturers. Such developments can boost defence stocks over the next 5-10 years. Defence assets to be acquired include nuclear-powered attack submarines, which will be built at the Visakhapatnam shipyard. Next-gen missile vessels are to be built by Cochin Shipyard Ltd. Air force will be strengthened with LCA Mk1A fighter jets, which are expected to be inducted in 2025.
Other purchases include Prachand helicopters and Advanced Towed Artillery Gun Systems (ATAGS). Priority defence assets to be imported include Scorpene submarines from France, MQ-9B high altitude long endurance drones, Rafale marine jets and C-295 transport aircraft. Even for imported items, the service and maintenance are likely to be given to domestic players.
Focus on exports
In addition to domestic needs, India is also focusing on exports of defence equipment. This will ensure that local defence manufacturers have a ready stream of orders from global players. In 2025, the Indian government is aiming around US$5 billion in exports of defence equipment. Defence equipment exports have already shown a health growth of 32.5% in FY 2023-24 to US$2.63 billion. The aim for FY 2028-29 is set at around US$6 billion. With both domestic and export orders, Indian defence equipment manufacturers can see an increase in their stock valuation in the coming years.
Which Indian defence stock to invest?
There are many defence stocks in India that you can invest in. Especially if you are looking at a long-term investment option. Below are some of the defence stocks that show potential.
- Hindustan Aeronautics Ltd (HAL)
- Bharat Electronics Ltd (BEL)
- Bharat Dynamics Ltd (BDL)
- Data Patterns (India) Ltd
- Mazagon Dock Shipbuilders and Garden Reach Shipbuilders
- Paras Defence and Space Technologies Ltd
- Sika Interplant Systems Ltd
DISCLAIMER – This article is for informational purposes only and does not constitute financial advice. Always conduct your own research or consult a SEBI-registered professional before making any investment decisions. Investments are subject to market risks.
