Garden Reach Shipbuilders & Engineers (GRSE) led the rally, surging 20%, while Mazagon Dock Shipbuilders jumped 13% and Bharat Dynamics gained 10%. Bharat Electronics rose 6%, Hindustan Aeronautics (HAL) advanced 5%, and Data Patterns added 4%, reflecting broad-based buying across the defence pack.
The trigger came after Trump criticised European allies for their limited role in the ongoing Iran conflict and warned that the United States may reconsider its NATO commitments. His remarks—including calls for Europe to “fight for itself” and reopen the Strait of Hormuz independently—heightened fears of a shift in global military alliances.
Analysts interpreted the comments as a potential inflection point in global defence spending, with any weakening of NATO cohesion likely to push countries toward higher military preparedness and procurement.
Geopolitics driving defence trade
Trump’s remarks could embolden adversaries such as Russia to test NATO’s collective defence framework, particularly Article 5, which mandates a joint response to attacks on member states. Any such escalation risks prolonging geopolitical instability—a key tailwind for defence stocks globally.
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The Iran conflict has already strained ties between the US and Europe, and Trump’s latest comments have amplified uncertainty around Western military coordination. For markets, this translates into expectations of sustained or rising defence expenditure worldwide.
Indian defence companies, many of which are increasingly export-focused, are seen as beneficiaries of this shift.
Strong domestic fundamentals add fuel
The rally in defence stocks is not purely sentiment-driven. Analysts point to strong underlying fundamentals, including robust order books and improving execution visibility across public sector defence companies.
India’s defence budget continues to expand, with the FY27 allocation pegged at around Rs 7.8 lakh crore ($85 billion), of which nearly 28% is earmarked for capital expenditure—including aircraft, missile systems, naval platforms, and drones.
Defence spending accounts for roughly 14–15% of the Union Budget, indicating that military modernisation remains a strategic priority.
At the same time, structural policy support is accelerating the sector’s long-term growth trajectory. Initiatives such as the Defence Acquisition Procedure (DAP-2020), production-linked indigenisation lists, defence corridors in Uttar Pradesh and Tamil Nadu, and higher FDI limits are pushing India toward self-reliance in defence manufacturing.
This shift is reducing dependence on imports while creating a scalable domestic ecosystem.
Exports emerging as a key growth lever
India’s defence exports have seen a sharp uptick, rising from about Rs 700 crore in FY14 to Rs 23,400 crore in FY25, with the government targeting Rs 50,000 crore by FY29.
Products such as missile systems, radar equipment, helicopters, and naval vessels are finding increasing acceptance in global markets—especially among countries seeking diversified supply chains beyond traditional Western suppliers.
Brokerages remain constructive on the sector. Motilal Oswal noted that defence companies already have strong order books and stand to benefit further from export opportunities, while ongoing indigenisation efforts are gradually mitigating risks related to imported components.
Within the space, Bharat Electronics continues to be a preferred pick among analysts.