Story Content

This is because the defense stocks have soared! BEL, Paras Defence, and Mazagon Dock are flying 8-19%. All the above raises the question of which one to buy.

The Iran-Israel-US war has seen the wider stock market bleed; the Indian defense stocks sector, however, is going against gravity.

On April 1, the Nifty index shot up by more than 7 percent in one day as Sensex and Nifty kept coming under stress. And it is not a one-day narration; this past month the defense index has surged over 11% as compared to the falling Nifty 50 by 4%.

What Is the Cause of this Rally?

Three big reasons. To begin with, the conflict between Iran and war is compelling all states to increase military expenditures, and India is not an exception. Second, the Defense Acquisition Council gave the green light to 2.38 lakh worth of projects on missiles, airplanes, sea ships, and spy systems on March 27. Third, the defense budget of India in FY27 is at a historic level of 7.85 lakh crore with high momentum in Make in India.

Best Buy (BB) is the top-gaining stock in April, up 6.3 percent.

• GRSE — up 19%
• Cochin Shipyard — up 15%
• Mazagon Dock — up 13.5%
• Paras Defence, BEL, BDL, Apollo Micro—up 8-10%
• HAL, Solar Industries—up 5 percent.

So What Stocks Should You Think About?

• BEL (Bharat Electronics) — Has an order book of about 75,000 crore, which is essentially debt-free, with revenue increasing at 17 percent per year. Motilal Oswal analysts have it as a top pick, as it has an 18% revenue CAGR up to FY28.
• BDL (Bharat Dynamics)—It is the only manufacturer of missiles in India that has a huge order book of 25,500 crore. The Iran war is a boon to direct beneficiaries of the global missile demand needs.
• Mazagon Dock—Construction of hostile submarines and warships for the Indian Navy. With a high return on equity, 34 percent is debt-free. A compounding tale of a long-term nature.
• Paras Defence is a high-growth and small cap that has exposure to DRDO, ISRO, and electro-optic defense. Risky and high-paying.

One Noteworthy Caution: Defense stocks are at present very high valuation P / E ratios of over 3500x. To a large extent, much of the good is already discounted. Analysts recommend that investments in small SIPs, as opposed to lump sums, be done to smooth out the risk.

Long term—this is a sector that is heading only in one direction. The defense export target that India has is 50000 crore by 2029, and the push behind Make in India is a real one.