India’s defence sector is in the spotlight after the government cleared procurement proposals worth around Rs 1.1 lakh crore in a single sitting. 

Almost 98% of the spending is expected to come from domestic industry. This has put the spotlight on companies that could benefit from a larger order pipeline.

But which stocks are actually best placed to benefit? The brokerage house Kotak Institutional Equities sees Bharat Electronics (BEL) and Hindustan Aeronautics (HAL) as the key beneficiaries of the latest clearances, while several land-systems companies could also see a read-through.

However, it is important to understand that Acceptance of Necessity, or AoN, is only the first stage. 

Now, let’s take a look at what the brokerage house outlook on this latest development and which stocks are there in its basket – 

Rs 1.1 lakh crore clearance: Why it matters

The Defence Acquisition Council (DAC) approved procurement proposals worth around Rs 1.1 lakh crore on September 7 for the Army, Navy and Air Force.

Kotak said, “Nearly 98% of the value is earmarked for domestic industry, making this one of the largest single-sitting indigenous clearances on record.”

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The current package is different from the import-heavy approvals seen earlier in March 2026. This time, the focus is more strongly tilted towards domestic manufacturing and the Buy-Indian/Indian Designed, Developed and Manufactured (IDDM) route.

The Army accounted for a large part of the approvals, while the Navy received clearances for Arudhra radars and marine gas turbines. The Indian Air Force also received approvals for aircraft upgrades, electronic warfare systems and other secure-access equipment.

BEL: Likely to be multi-item beneficiary

Kotak sees BEL as one of the biggest multi-item beneficiaries.

The company could gain from several parts of the package, including Arudhra radars, ground-based jammers, electronic warfare upgrades and secure-access card systems.

The brokerage noted, “BEL screens as the standout multi-item winner present across CBRN systems, Arudhra radars, ground-based jammers, IAF EW upgrades and secure-access cards.”

Kotak also highlighted that BEL had already secured around Rs 6,200 crore of orders in FY27, providing another layer of order visibility.

However, investors should note that Kotak’s current rating on BEL is ‘Reduce’.

HAL: Biggest single-ticket opportunity

HAL has a different advantage. The brokerage identifies the company as the largest single-ticket beneficiary because of approvals linked to the Advanced Light Helicopter (ALH) Dhruv, where HAL is the sole original equipment manufacturer (OEM).

The company could also benefit from marine gas-turbine assembly and upgrades involving Indian Air Force platforms.

Kotak said, “HAL is the biggest single-ticket beneficiary via ALH Dhruv (sole OEM), marine gas-turbine assembly and IAF platform upgrades.”

The brokerage has an ‘Add’ rating on HAL, making it its preferred stock in the defence sector.

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Land systems: Other stocks to watch

The latest approvals also create opportunities beyond radar and aircraft companies.

According to Kotak, BEML, Larsen & Toubro (L&T), Ashok Leyland Defence, Tata group companies and Bharat Forge could benefit from approvals covering high-mobility vehicles, mine-layers, trawl tanks and bridge systems.

The brokerage described the land-mobility package as a significant development, given the breadth of equipment covered.

The big wait: When will orders actually arrive?

AoN is an in-principle approval, not a confirmed purchase order. Kotak estimates that the contract process can take around one to two years.

The brokerage said, “AoN is the first, in-principle approval in the DAP cycle, with contract typically running a 1-2-year lag.”

As a result, Kotak expects most order accrual from these approvals to come during FY27-29, rather than immediately.

Kotak’s defence sector recommendations at a glance

Kotak retained its ‘Add’ rating on HAL, while it has a ‘Reduce’ rating on BEL. The brokerage has a ‘Sell’ rating on Mazagon Dock Shipbuilders, Cochin Shipyard and Solar Industries India.

It said, “We retain our estimates and FVs; HAL is our preferred pick in the sector.”

What investors need to watch

The latest Rs 1.1 lakh crore defence clearance strengthens the sector’s long-term order pipeline, but near-term earnings may not move immediately.

For Kotak, HAL stands out as the preferred defence pick, while BEL remains a major beneficiary of the approvals despite its ‘Reduce’ rating. 

Disclaimer: This article is based on research reports from one or more brokerage firms and is for informational purposes only. The views, target prices, and recommendations expressed are those of the respective brokerage firms and do not reflect the official policy or position of Financial Express. This should not be construed as an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor before making any investment decisions.