Sector Watch: Nifty India Defence index up 7.5% YTD; are margin pressures ahead for defence stocks?

Experts said that although the defence sector is not expected to have a major adverse impact like some of the other industries due to the West Asian conflict, the ripple effect from the supply chain disruption is likely to weigh on the earnings in the fourth quarter and the companies' margins.

How has Nifty India Defence performed?

The Nifty India Defence index has delivered stock market investors more than 7.5% returns on their investment on a year-to-date (YTD) basis in 2026, fuelled by the strong financial performance of the companies, strong exports, and major order book wins amid India’s goal to become a defence manufacturing hub.

The index surged 2.35% to hit an intraday high of 8,369.85 points during the stock market session on Friday, April 10, compared to 8,176.95 points at the previous market close, NSE data showed.

The Nifty’s defence index has significantly outperformed the benchmark NIFTY50 index, which has lost over 8% on a YTD basis so far in 2026, due to constant foreign investor outflow, the US-Iran conflict in West Asia, and a weakening Indian rupee rate over the last six weeks.

NSE data also showed that the Nifty India Defence index has surged 36% in one year and is trading over 9% higher in the last five market sessions on the Indian stock market.

Order updates in the sector

The overall defence sector has witnessed strong order inflows, with companies diversifying their order book across multiple segments of business to boost the overall topline revenue growth.

Earlier this month, Navratna defence PSU Bharat Electronics announced that the company has achieved a turnover of around ₹26,750 crore in the financial year 2025-26, marking a 16% growth compared to its year-ago level.

In total, the state-run giant bagged orders worth ₹30,000 crore, which includes $346 million of export orders of items like avionics for LCA, mountain radars, EW suites for helicopters, air defence radars, EOIR payloads for airborne and naval platforms, etc.

Like BEL, Hindustan Aeronautics Ltd also received major orders to supply light combat aircraft (LCA) Mk1A fighters to the Indian Air Force for a sum of ₹62,370 crore. In Q4, the company also announced the inauguration of its new production line at Nashik.

Other companies like Mazagon Dock, Cochin Shipyard, and Bharat Forge also received major orders from the domestic and international markets, resulting in the overall momentum of the defence sector.

Defence sector outlook

Mumbai-based independent analyst Ajay Bodke explained that the fourth quarter of a financial year is typically the strongest quarter for sectors like defence and railways, as the government aims to wrap up placing its orders before the end of the financial year to avoid any lapses in the ordering target.

“In view of the heightened geopolitical tensions in the Gulf, the necessity to beef up our defences is all the more, and hence I think the government has also expedited procurement of some of the key defence platforms for the Indian Navy and Air Force, as well as the Army,” said the veteran capital markets expert.

With strong order inflows from the domestic market, the Indian defence sector will not be “immune” from the West Asia crisis impact, but the recovery of the companies will be quicker due to the order book momentum in the market.

“The order book momentum will be quicker, and it will pay out in terms of operating cost or operating leverage over a period of time. Hence, as the order book inflates, the blow from the pressure on input cost gets softened,” the expert said.

What are the challenges for the defence sector?

On the challenges front, Ajay Bodke said that the added expenses due to the rising input costs, along with the supply chain disruption leading to a buildup of larger-than-normal inventories, will have an impact on the fourth-quarter results.

“I think in the fourth quarter, one clearly would see pressures building up on the cost side for the companies because of the rise in metal prices, in turn increasing the input costs,” he said.

“The companies will also need to be cognisant, looking out for geopolitical situations causing supply chain flare-ups, which will make them hold a higher inventory level in general, in turn putting pressure on the margins.”

Analysts are also likely to tone down their expectations from the pre-crisis levels due to the supply chain disruptions across the sectors in the domestic market.

Top defence stocks in focus

Fuelling the gains of Nifty India Defence, BEL stock has the largest market capitalisation (M-Cap) of over ₹3.23 lakh crore amongst its peers. The defence stock has delivered more than 11% returns on its investment on a year-to-date (YTD) basis so far in 2026.

BEL shares have risen 922% in five years, 343% in three years, and over 58% in the past one year, according to the exchange data. In its Q3 results, the company recorded a 20% rise in its net profit to ₹1,311 crore, fuelled by a 24% rise in its revenue from operations.

Although being the second-largest defence stock by M-cap of over ₹2.74 lakh crore, HAL shares have 6.6% on a year-to-date basis in 2026. The company’s shares have risen 720% over the last five years, over 191% in the last three years, and 1.8% in one year, as per NSE data.

HAL stock is trading over 11% higher over the last five market sessions on the Indian stock market. The company also recorded a 29% increase in its consolidated net profits to ₹1,866.68 crore in the third quarter of FY2025-26, with its revenue from operations rising 10.6% YoY.

With an M-cap of over ₹1.27 lakh crore, Solar Industries' stock has delivered more than 15% returns on its investment on a YTD basis so far in 2026. The company is the third-largest listed defence stock on the Indian stock market.

Shares of Solar Industries have risen 970% in five years, 277% in the last three years, and 29% in the past one-year period, as per NSE data. Although the shares have lost 4.57% in one month, the stock has been trading over 7% higher in the last five market sessions.

Solar Industries’ net profits witnessed a nearly 55% jump to ₹314.87 crore after the October to December quarter, with its revenues rising 38% to ₹1,973.08 crore, compared to year-ago levels.

Mazagon Dock stock is flat on a YTD basis, but the shares of the shipbuilding major are trading over 9% higher over the last five market sessions on the Indian stock market.

With an M-Cap of ₹99,711 crore, the company’s stock has rallied over 2,243% in five years, 621% in three years, and more than 4% in the last one-year period. However, the shares are down 0.22% over the last month.

Q3 results data showed that Mazagon Dock witnessed a 28% rise in its consolidated net profits to ₹807 crore, while the revenue from core operations increased by 33% to ₹3,144 crore in the quarter.

The defence equipment maker’s stock has delivered more than 21% returns on its investment on a year-to-date basis in 2026 and is trading over 8% higher over the last five market sessions on the stock exchange.

Shares of Bharat Forge have gained 192% in five years, 135% in three years, and more than 83% in one year, NSE data showed. However, in the last one-month period, the company’s stock has lost 3%.

The October to December quarter results for the financial year ending 2025-26 showed that the company’s net profit dropped 16% to ₹212.78 crore, and the revenue from core operations dropped 10% to ₹3,475.55 crore.