These smallcap defence players witness strong FII buying in Q1 FY27; shares soar up to 180% YTD

Defence stocks came back into focus after the Ministry of Defence on Tuesday announced a business opportunity plan worth ₹3,070 crore.

The NIFTY India Defence index, a benchmark for all defence sector stocks, hit a fresh record high of 9,977 on Tuesday. But unlike previous rallies, this surge has been driven largely by mid- and small-cap defence companies.

Shares of key defence players such as Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd, and Bharat Dynamics Ltd have delivered returns in the range of 6%-22%. Shipping defence players like Cochin Shipyard, Mazagon Dock Shipbuilders, and Garden Reach Shipbuilders trade as much as 50% lower than their record-high levels.

However, the NIFTY India defence index rallied over 28% in 2026 on a YTD basis. A large part of this rally was led by mid-cap and small-cap defence players, whose shares soared up to 187% during 2026 on a YTD basis.

MTAR Technologies (YTD returns +187%)

MTAR Technologies Limited is a leading precision engineering solutions company engaged in the manufacture of mission-critical precision components with close tolerances (5-10 microns), and in critical assemblies, to serve projects of high national importance. It primarily serves customers in the clean energy, nuclear, space and defence sectors.

The company’s share price soared over 186% in 2026 on a YTD basis, after hitting record high levels of ₹8,714 apiece on the NSE on June 19, 2026. The company posted robust growth in Q1FY27 as revenue surged 130% to ₹360 crore, compared to ₹156 crore in the same period last year. The EBITDA for the quarter also tripled from ₹28 crore in Q1FY6 to ₹84 crore in the same period last year.

Beyond the robust earnings, the company witnessed a sharp increase in FII shareholding as they raised their stakes from 17% in Q4FY26 to 24.8% in Q1FY27. The FII shareholding has consistently increased from 7.5% in Q1FY6 to 24.8% in Q1FY27.

Paras Defence & Space Technologies (YTD returns +129%)

Paras Defence & Space Technologies Limited is engaged in designing, developing, manufacturing, and testing a wide range of defence and space engineering products and solutions. It is one of the leading ‘Indigenously Designed, Developed and Manufactured’(IDDM) category private sector companies in India, which caters to four major segments of the Indian defence sector, i.e., defence and space optics, defence electronics, electromagnetic pulse (EMP) protection solutions, and heavy engineering.

In the quarter gone by, the company’s sales rose 35% to ₹118 crore for the quarter ending June 2026, vs ₹87.4 crore during the year-ago period. The company’s net profit during the quarter surged over 38% to ₹21.4 crore as compared to ₹15.4 crore in the same period last year.

Additionally, FIIs have increased their stake from 5.06% as of the quarter ending March 2026 to 8.29% in the quarter ending June 2026. The sharp rise in FII interest propelled the stock price from ₹593 in April June 2026 to ₹1,294 apiece by the end of June 2026. The rally further continued to hit a fresh record high of ₹1,577 apiece on Wednesday, Aug 19, 2026.

Astra Microwave Products ( YTD returns +73%)

Astra Microwave Products (AMPL) is engaged in design, development, manufacture, and supply of high-value-added RF and microwave super components, sub-systems, and systems finding application in Defence, Space, Telecom, Meteorology, and Civil communication markets. Astra Microwave’s share price delivered over 73% returns in 2026 on a YTD basis, the second-highest performer in the NIFTY India defence index.

During Q1FY27, the company’s revenue fell 12% YoY to ₹177 crore as compared to ₹200 crore in the same period last year. Similarly, the operational profit (EBITDA) also declined 19% YoY to ₹33 crore, compared to ₹41 crore in the same period last year. Lastly, the net profit declined from ₹16 crore to ₹12 crore in the same period.

However, despite the recent lagging performance, FII interest remained steady in the company as they increased their stake by 7.56% in Q4FY26 to 10.74% in Q1FY7.

Disclaimer: This article is written purely for informational purposes and should not be considered investment advice from Upstox. Securities mentioned are illustrative and not recommendations. Please consult a financial advisor before making any investment decisions.