Mumbai: Indian defence stocks witnessed a strong rally on Wednesday, driven by global developments that promise increased demand for defence equipment. Shares of Garden Reach Shipbuilders & Engineers surged 20 per cent to Rs 1,641 per share, while Mazagon Dock Shipbuilders and Cochin Shipyard soared 10 per cent each. Other key players in the sector, including Paras Defence & Space Technologies and Hindustan Aeronautics (HAL), also gained significantly, rising 6.5 per cent and 5.3 per cent, respectively.
Germany’s Defence Spending Breakthrough
A key trigger for the rally was Germany’s landmark spending package that cleared constitutional borrowing restrictions on defence expenditure. With this move, Berlin is set to unlock billions of euros to enhance its military capabilities. Currently, Germany spends over 1 per cent of its GDP (~€45 billion) on defence, and this bill is expected to provide a further boost, as reported by Bloomberg.
EU’s €800 Billion Rearmament Plan Adds Fuel to the Fire
The surge in Indian defence stocks was further supported by the European Union’s €800 billion (~$850 billion) rearmament plan, announced earlier this month. The plan aims to strengthen the EU’s defence infrastructure, particularly in the wake of the US suspending military aid to Ukraine. With European Original Equipment Manufacturers (OEMs) seeking alternative suppliers, Indian defence companies are poised to benefit from increased orders for components and subsystems.
IdeaForge, Bharat Dynamics Among Top Gainers
Apart from shipbuilders, IdeaForge Technologies saw an impressive 17.7 per cent surge to Rs 396 per share, making it one of the biggest gainers of the day. Bharat Dynamics also witnessed an 8.5 per cent increase, reinforcing the bullish sentiment in the sector. The Nifty India Defence Index saw a broad-based rally, with all 16 constituent stocks trading higher.
Why India’s Defence Sector is Attracting Global Attention
With rising geopolitical tensions and increasing global defence budgets, India’s robust and cost-effective defence manufacturing ecosystem is gaining prominence. Elara Capital recently noted that the EU’s shift toward alternative suppliers will likely lead to a significant influx of orders for Indian firms, both public and private. This global realignment in defence procurement presents long-term growth opportunities for Indian defence players.
What Lies Ahead?
The sharp rally in Indian defence stocks signals growing investor confidence in the sector. With major global players looking towards India for partnerships and procurement, domestic firms stand to gain from the rising demand for defence technology and infrastructure. Given the ongoing geopolitical shifts and heightened defence spending, Indian defence stocks could continue to see sustained momentum in the coming months.
