BEML, BEL, Mazagon Dock: Defence index surges 39% in June quarter; top factors that will determine earnings in Q1

Earnings of defence equipment makers such as Bharat Electronics, Bharat Dynamics, Cochin Shipyards, BEML, Mazagon Dock, Hindustan Aeronautics and Paras Defence, among others, will be closely watched in the first quarter of the current financial year as these stocks have massively outperformed the NIFTY50 index in the April-June quarter.

NIFTY India Defence index, the measure of 18 defence equipment makers, surged 39% in the first quarter as against 8.5% gain in the benchmark NIFTY50 index. Defence stocks came under strong buying interest in the first quarter in the aftermath of Operation Sindoor to avenge the killing of innocent citizens in Pahalgam in April. Meanwhile, a resilient order book for defence companies also added to the bullish sentiment for defence stocks.

The response by Indian armed forces displayed the might of Indian defence companies to the world which led to surge in defence shares, analysts said.

"Q1FY26 saw heightened India-Pakistan tensions leading to Operation Sindoor, which underlined the strategic role of UAVs and missile defence. Emergency procurement orders of ₹30,000-35,000 crore are anticipated to bolster critical capabilities," Nirmal Bang institutional Equities said in a report.

India’s annual defence production crossed a record ₹1.27 lakh crore in FY25 and is projected to reach ₹1.75 lakh crore by FY29, underscoring the nation's aggressive push for self-reliance in defence and growing global relevance as an arms exporter.

In a landmark year, the Ministry of Defence signed 193 contracts worth over ₹2.1 lakh crore in FY25—nearly double the previous record—with 92% of these awarded to Indian companies, reinforcing the government’s “Make in India” initiative, Nirmal Bang said.

Defence exports continued their upward momentum, rising 12% year-on-year to ₹23,620 crore. State-owned defence public sector undertakings (PSUs) contributed ₹8,390 crore, marking a strong 43% YoY jump, while private sector firms accounted for ₹15,230 crore, exporting systems to nearly 80 countries, Nirmal Bang added.

The total number of export authorisations increased 16.9% YoY, and the government has set an ambitious ₹50,000 crore export target by FY29.

The Defence Acquisition Council cleared 10 key capital acquisition proposals worth nearly ₹1.1 lakh crore, Nirmal Bang Institutional Equities added.