5 Defence Stocks to Watch as India’s Military Sector Takes Off

India’s precise and strategic military response during Operation Sindoor, following the Pahalgam terror attack, has reignited investor interest in the country’s defence sector. As terror threats escalate, so too does the urgency for indigenous defence solutions—and markets have taken note.

The Nifty India Defence Index has surged 32% in the past year, vastly outperforming the Nifty 50’s 10% return. Interestingly, the index was underperforming until May 6, 2025. But post-Sindoor, it rallied sharply, signalling a shift in sentiment driven by real-time geopolitical events.

📈 Long-Term Growth Story: More Than Just Headlines

While recent conflict has propelled defence stocks to the front page, this isn't a flash in the pan. The Indian defence sector has been building a robust foundation over the past decade:

Defence Budget: Grown from ₹2.5 trillion (FY14) to ₹6.2 trillion (FY25)

Domestic Production: Jumped from ₹0.5 trillion to ₹1.75 trillion

Exports: Exploded 10X from ₹2,000 crore to over ₹21,000 crore

This growth is powered by strategic reforms, Make-in-India initiatives, public-private partnerships, and the rise of dual-use defence tech.

🚁 Drones: The Fastest-Growing Segment

Among the hottest verticals in defence is military drone technology. According to Grand View Research, India’s military drone market stood at $1.5 billion in 2024—a small share of the global pie, but growing rapidly.

Expected CAGR: 18% through 2030

Target Market Size: $4 billion by 2030

The government’s push to modernize defence post-Pahalgam has fast-tracked drone procurement, making this a segment to watch.

And drones aren’t just for defence. Civilian applications are booming across:

Agriculture

Surveillance & inspections

Logistics & delivery

Emergency response

Media & entertainment

📊 5 Defence Stocks to Watch

While drone-dedicated public companies are limited, several Indian firms have exposure to both traditional and emerging defence technologies:

1. Hindustan Aeronautics Ltd (HAL)

India’s largest aerospace and defence firm. While drone revenues aren’t broken out, HAL is critical to India’s aviation strength, including UAV development for the armed forces.

2. Bharat Electronics Ltd (BEL)

Specializes in radar, weapon systems, and avionics. BEL is actively working on AI-powered defence systems and is part of India’s indigenous drone manufacturing ecosystem.

3. Paras Defence & Space Technologies

Engaged in defence electronics, optics, and drone tech. Although not fully transparent about drone-specific revenues, Paras has positioned itself as a key supplier of UAV components.

4. Zen Technologies

Focused entirely on defence training systems and simulators. Zen also provides anti-drone solutions and has mentioned drone initiatives in recent earnings calls.

5. ideaForge Technology

One of India’s only pureplay listed drone manufacturers, ideaForge specializes in UAVs for surveillance, mapping, and defence. Though niche, its market relevance is growing.

🧠 What Investors Should Keep in Mind

While geopolitical tension may fuel short-term rallies, defence remains a long-term strategic play. The transformation is structural—backed by policy, R&D investment, and global positioning. However, transparency on drone-specific revenues and earnings remains limited.

Key risks include:

Regulatory hurdles

Export restrictions

Technology dependence on foreign suppliers

Volatility driven by global conflict cycles

📌 Final Thoughts

India’s defence market is entering a new era. With growing geopolitical challenges, government focus, and technological innovation, defence stocks—especially those with drone capabilities—may offer investors a compelling long-term story.

As always, diversification and diligent research remain key.