Data Patterns, BEML, BEL: Defence stocks skyrocket in the run-up to Budget FY27; Nifty India Defence index zooms 7%; here is why

At the close, the NIFTY INDIA DEFENCE index stood at 8,167.95 levels, up 530.70 points, or 6.95%.

All the components of the index ended in the green. The top gainer on the index was Data Patterns (up 13.52%), followed by BEML (up 10%) and Solar Industries India (up 9.42%).

Other notable gainers were Mishra Dhatu Nigam (MIDHANI) – up 9.22% – and Bharat Electronics (BEL) – up 9.21%.

Optimism ahead of Budget FY27

Most analysts and industry leaders are of the view that defence will be the priority sector in the Budget and expect up to 25% growth in the capital outlay.

Rajkumar Singhal, CEO, Quest Investment Managers, in an interview with Upstox News, said that defence is a primary candidate for enhanced support, with expectations of 20–25% growth in capital outlay to drive indigenisation in high-tech areas like UAVs and anti-drone systems.

Echoing similar views, Sonam Srivastava, founder and fund manager at Wright Research PMS, said continued emphasis on indigenisation, higher domestic procurement, and long-term order visibility for private players would strengthen India’s defence manufacturing ecosystem.

Budgetary support for R&D and exports could further improve margins and reduce dependency on imports, supporting sustained earnings growth for the sector.

Samir Sheth, Managing Partner, Deal Advisory, BDO India, said that the defence manufacturing ecosystem in India is considering Budget 2026 as the point of critical indigenisation. There is an anticipation of more visibility into the long-term procurement pipelines, accelerated contracting processes and ongoing encouragement of participation in the private sphere.

"In our view, predictability in defence expenditure is important as compared to the headline allocations. This is what allows domestic players to invest in scale and technology due to the stable order visibility," Sheth added.

"The share of capital expenditure in total government expenditure may be increased further, but changing its composition in favour of advanced technology sectors such as AI, GenAI, space, robotics and advanced infrastructure, as well as defence capital expenditure, is desirable," the EY Economy Watch report said.

India-EU Defence Deal

India and the European Union on Tuesday sealed a landmark free trade agreement-- billed as the "mother of all deals" – with Prime Minister Narendra Modi and the top EU leadership unveiling a transformative five-year agenda to largely leverage trade and defence in protecting the rules-based world order.

The two sides also inked two crucial pacts -- one on security and defence collaboration and another on the mobility of Indian talents to Europe -- after Prime Minister Modi hosted EU leaders Ursula von der Leyen and Antonio Costa for summit talks amid frosty ties with the US.

Von der Leyen, referring to the defence partnership pact, said Europe and India have chosen to be reliable partners to one another.

"We are not only making our economies stronger, but we are also delivering security for our people in an increasingly insecure world. And today, the world's two largest economies and democracies launched their first-ever security and defence partnership," she said.

An earlier PTI report said that the proposed Security and Defence Partnership (SDP) will facilitate deeper defence and security cooperation between the two sides.

The SDP will bring interoperability in the defence domain, and it will open up avenues for Indian firms to participate in the EU's SAFE (Security Action for Europe) programme.

SAFE is the EU's Euro 150 billion financial instrument designed to provide financial support to member states to speed up defence readiness.

At the summit, India and the EU were also set to launch the negotiations for a Security of Information Agreement (SOIA).

The SOIA is expected to boost industrial defence cooperation between the two sides.

Encouraging Q3 numbers

The investor sentiment also got a boost from a good set of numbers by Bharat Electronics Limited (BEL). BEL reported a consolidated net profit of ₹1,579 crore on Wednesday, January 28, for the third quarter of the current financial year, marking an increase of 20.4% from ₹1,311 crore in the same period last year.

The company's revenue from operations grew 24% to ₹7,154 crore in the October-December quarter (Q3 FY26) as compared to ₹5,771 crore in the corresponding quarter of the previous fiscal year.

Up to Q3 of FY 2025-26, BEL said it has achieved revenue from operations of ₹17,302.46 crore as against ₹14,538.30 crore recorded in the corresponding period of the previous year. In the same period, the firm’s Profit After Tax (PAT) stood at ₹3,845.32 crore as compared to ₹3,183.47 crore in the same period of the previous year.