The global brokerage firm Jefferies has released its latest report on India’s growing defence sector and it is bullish. With government capex rising sharply and India pushing its defence exports globally, Jefferies has identified three key stocks that could benefit from this momentum.
In its report, Jefferies has listed Hindustan Aeronautics (HAL), Data Patterns, and Bharat Electronics (BEL) as its top investment picks in the sector. It has assigned a target price of Rs 6,475 for HAL, implying an upside of 31.6%. Meanwhile, Data Patterns has a target of Rs 3,400 (upside: 13.9%) and BEL is rated with a target of Rs 420 (upside: 3.1%).
Jefferies on India’s defence sector: Defence budget sees a sharp uptick
According to the brokerage report, India’s defence spending rose 25% year-on-year in March 2025, achieving the revised FY25 growth estimate. Furthermore, FY26 began with a 122% YoY increase in capital expenditure in April, compared to a 13% growth budgeted for the entire year.
Post ‘Operation Sindoor’ in May 2025, the Indian government has made a renewed effort to highlight the capabilities of domestically developed systems such as BrahMos missiles, Akashteer, and Sukhoi jets, the brokerage report noted.
Jefferies on India’s defence sector: India targets Rs 50,000 crore in defence exports by FY30
The report further noted that India is aiming to more than double its defence exports from Rs 23,600 crore in FY25 to Rs 50,000 crore by FY30.
As per Jefferies, “India is being enterprising in the rising opportunity backdrop.” The government has been pitching homegrown weapons systems to overseas markets, and several mid-sized Indian firms are already winning orders. These include Sunita Tools, which received a letter of intent to supply 1 million artillery shells to a NATO country, and NIBE, which bagged a Rs 1.5 billion contract to deliver rocket launchers to Israel.
Jefferies on India’s defence sector: Global defence spending also on the rise
The brokerage report further pointed out that NATO nations are now proposing to spend up to 5% of GDP on defence and related areas. This includes 3.5% on core defence and 1.5% on associated spending.
NATO spent $1.5 trillion on defence in 2024, and even a 1% increase in GDP allocation could add $530 billion annually” to global defence expenditure, the report added.
Jefferies on India’s defence sector: Public sector still leads, private participation rising
While PSUs like HAL and BEL continue to dominate India’s defence landscape, private players are also gaining ground. According to Jefferies, “Private players share among listed defence companies rose to 14% in FY25 from 9% in FY22.”
The Ministry of Defence has opened up key opportunities, allowing private players to participate in high-value projects like the Advanced Medium Combat Aircraft (AMCA) something earlier restricted to HAL. The report noted, “PSUs will remain dominant in defence, especially given their strong R&D edge and visibility of double-digit earnings growth.”