Key defence stocks have seen significant correction in their share price. HAL is down over 20% in 2025, so while BEL and Bharat Dynamics too declined over 10% this year. The correction in defence stocks intensified after the Union Budget for FY26 did not announce any major allocation for the sector. However, the brokerage firm Elara Capital, back from its visit to the 15th Aero India 2025 Defence Exhibition, is positive on the sector as it bets on indigenisation and exports, with a rising share of private defence companies.
Elara Capital: HAL, BEL, Bharat Dynamics top defence picks
The brokerage house chose Hindustan Aeronautics, Bharat Heavy Electronics, and Bharat Dynamics as the top PSU picks in the industry. In the private defence space, Zen Technologies, Data Pattern, Azad Engineering, Astra Microwave Products, and Maini Precision Products. Increased private participation may be the theme for the upcoming years, supported by new acquisitions, huge R&D progress and global collaborations, said Elara Capital.
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India recently held the 15th Aero India 2025 Defence Exhibition in which 900 exhibitors participated, including indigenous and global companies. According to Elara Capital, who visited the event, the participation was the highest ever. This showcased a focus on the growth of domestic and private sector contribution to defence production.
Govt’s ambitious defence production/export target
Elara Capital thinks that India’s defence story will be domestic defence production and exports. India’s Defence Minister Rajnath Singh said the country will achieve a domestic defence production target of Rs 1.60 lakh crore and exports of Rs 30,000 crore by FY26.
For context, in FY24, India’s DDP stood at Rs 1.3 lakh crore, up 174% in almost a decade. Current exports stood at Rs 21,000 crore, which are set to increase, led by growing interest from France, Armenia, the Philippines, Indonesia, Vietnam, the African Union, and the Middle East.
Moving forward, the HAL expects to deliver 12 aircraft in FY26, which may be a daunting task, said Elara Capital. HAL is suffering from supply chain issues related to GE404 engines for its light combat aircraft (LCA) Tejas Mk 1A fighter aircraft.
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Elara Capital has a ‘Buy’ rating on HAL with a target price of Rs 5,160.
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