Budget 2025: HAL, BEL, Mazagon Dock, Bharat Dynamics: Defence stocks in focus; 5 things you need to know

Finance Minister Nirmala Sitharaman at 11 AM on Saturday, February 1, will present her eighth consecutive Budget for the year 2025-26.

In July 2024, the government set aside ₹6.22 lakh crore as defence outlay for 2024-25, an increase of 4.79% over the previous fiscal's budgetary allocation. A total of Rs 1.72 lakh crore was set aside for the military for capital expenditure that largely includes purchasing new weapons, aircraft, warships, and other military hardware.

Defence Sector: Recent updates

• India is expected to seal in the next few weeks procurement of 26 naval variants of Rafale jets and three Scorpene submarines from France to further crank up its naval prowess, PTI reported on Thursday, January 30.

PM Modi and French President Emmanuel Macron are expected to hold bilateral talks on the sideline of the summit, being held on February 10 and 11.

In July 2023, the defence ministry approved the purchase of 22 Rafale (marine) jets from France, primarily for deployment on board the indigenously built aircraft carrier INS Vikrant.

The ministry had also cleared the procurement of three Scorpene submarines from France

• In January 2025, the Ministry of Defence signed a ₹1,560.52 crore contract with the Heavy Vehicles Factory for the procurement of 47 T-72 Bridge Laying Tanks.

The move, according to the MoD, aims to improve the Army's operational capabilities. Further, as per the MoD's statement, the acquisition is expected to strengthen the Army's mechanised forces by providing essential bridging support during both offensive and defensive operations, ensuring greater mobility and tactical flexibility.

The contract was formalised by senior officials from the MoD and HVF, AVNL, in the presence of Defence Secretary Rajesh Kumar Singh, the official statement added. The T-72 Bridge Laying Tanks are crucial equipment used by the Indian Army's mechanised forces to launch bridges during both offensive and defensive operations.

These vehicles enhance battlefield mobility and the army's offensive capability by providing integral bridging support for tanks and armoured vehicles.

• India has declared 2025 as the year of defence reforms and that the focus will be to roll out integrated theatre commands to boost tri-services synergy and ensure simpler and time-sensitive military procurement with a broader aim to transform the military into a technologically advanced force.

The overall aim of the nine-point reforms planned by the defence ministry would be to ensure deeper collaboration among key stakeholders, break silos, eliminate inefficiencies, and optimise utilisation of resources.

The reforms would lay the foundation for "unprecedented" advancements in defence preparedness and ensure India's security and sovereignty amidst the challenges of the 21st century, Defence Minister Rajnath Singh said.

Budget Expectations

Experts believe that the allocation for the defence sector is likely to remain between 1.9% and 2% of the GDP in FY 2025-26, as the challenges persist with utilisation of funds allocated in the previous Budgets.

Modernisation of defence forces and a boost to local manufacturing to achieve self-reliance may remain in focus for the sector in Budget 2025. The government may also stress more private participation and public-private partnerships in the defence sector to achieve its strategic goals.

Top defence ministry officials have also highlighted adequate financial resources for defence forces to deter threats mainly from China and Pakistan, according to media reports.

According to reports, the government is expected to increase the capital expenditure to around ₹1.9 lakh crore in Budget 2025 for the defence sector. The Budget outlay may also focus on modernisation of military vehicles, procurements for the Indian Air Force and the upgradation of the Indian Navy fleet.

The government has been highlighting its priority on self-reliance in defence manufacturing and reducing imports. The finance minister’s announcements on boosting indigenous productions under the government’s ‘Aatmanirbhar Bharat’ initiative will also be keenly watched by experts.

Defense Stocks: Here is how they have fared in 12 months

Shares of Hindustan Aeronautics (HAL) have rallied 32%, while BEML stock has risen only 1%. Solar Industries India has jumped 61%, Bharat Electronics has rallied 60%, and Cochin Shipyard shares have jumped 69% during the period.