Shares of defence sector firms such as Hindustan Aeronautics Ltd, Solar Industries India Ltd, Bharat Electronics, Astra Microwave, MIDHANI, Azad Engineering, Bharat Dynamics, Zen Technologies and Dynamatic Technologies are creating a buzz after the Modi government notified 6th Positive Indigenisation List having 405 items with business potential of over Rs 3000 crore. ICICI Securities says that the order awarding momentum is expected to improve for the defence sector firms.
The brokerage assigned a buy call to Hindustan Aeronautics Ltd , MIDHANI and Solar Industries. It assigned ADD call to Bharat Electronics, Azad Engineering, and Bharat Dynamics.
Astra Microwave and Zen Technologies received HOLD calls from the brokerage. The brokerage assigned a REDUCE call to Dynamatic Technologies
Order awarding momentum could pick up in FY27/28
The brokerage maintains its structurally positive stance on the Indian defence sector and expects defence capex to sustain a double-digit CAGR for the next 4-5 years.
The brokerage noted that further, with the recent Defence Procurement Manual 2025, acquisition timelines are expected to be significantly compressed.
The recently introduced Defence Procurement Manual 2025 should further support the sector by materially shortening acquisition and procurement timelines, thereby improving the pace of order conversion.
The momentum on government approvals remains particularly encouraging. DAC approvals reached an all-time high in FY26 and have remained strong in the early part of FY27, with ?520bn of AoNs approved in Q1FY27 alone. The government’s decision to open missile technology and related opportunities to private-sector players also reinforces our earlier thesis that the missile segment could witness disproportionately strong growth over the medium term.
Against this backdrop, the brokerage expects order-awarding activity to accelerate through FY27–28, with aerospace, missiles, electronic warfare, and offensive as well as counter-drone systems emerging as key growth areas. The changing nature of modern warfare over the past few years has accelerated the need for precision weapons, unmanned systems, advanced surveillance, electronic warfare capabilities and integrated air-defence solutions, creating a favourable structural demand environment for Indian defence manufacturers.
The geopolitical environment provides an additional tailwind. The ongoing conflicts in the Middle East have heightened the urgency around defence preparedness and are likely to drive higher defence spending across GCC countries. This should create meaningful export opportunities for Indian OEMs, particularly those with established international track records, existing customer relationships or strategic MoUs in overseas markets.
The brokerage expects companies with proven capabilities and export credentials across missiles, drones, aerospace, defence electronics and radars to be the key beneficiaries of this evolving opportunity.
Overall, its believes the combination of higher domestic defence spending, faster procurement execution, changing warfare requirements and growing export opportunities can support a sustained multi-year growth cycle for the sector.
Within the space, HAL and Solar Industries remain its preferred BUY-rated stocks. The brokerage is also positive on BEL at the current market price.