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Budget 2026: Defence stocks such as Bharat Electronics Ltd (BEL), Mazagon Dock Shipbuilding Ltd, Hindustan Aeronautics Ltd (HAL), Bharat Dynamics Ltd (BDL), Astra Microwave Products Ltd, Data Patterns (India) Ltd and Paras Defence and Space Technologies Ltd are expected to remain firmly on investors’ radar in the Union Budget 2026 today. Market participants are building positions in anticipation of a moderate rise in defence allocations, along with continued policy thrust on indigenisation and domestic manufacturing.

Heightened geopolitical tensions across regions — including developments involving the US, Venezuela and ongoing conflicts in the Middle East — have reinforced the strategic importance of defence preparedness. This backdrop has already translated into strong price action in defence counters ahead of the Budget.

In the previous Budget for FY26, the government earmarked ₹6,81,210.27 crore for the Ministry of Defence, marking a 9.5% rise over the prior year.

Brokerages expect the government to maintain fiscal prudence while still raising capital allocations toward strategic sectors such as defence. Analysts believe defence outlay could see a meaningful increase, improving earnings visibility for companies with robust order books and execution capabilities.

Among defence PSUs, HAL is viewed as a beneficiary due to its aircraft and engine manufacturing pipeline. BEL continues to be seen as a proxy for defence electronics, radars and communication systems. BDL is expected to draw interest given its role in missile systems, while shipbuilders such as Mazagon Dock and Garden Reach Shipbuilders are also in focus amid naval modernisation.

Nomura India has projected a high single-digit to 20% rise in the defence budget, with a larger share expected to go toward domestic procurement, modernisation and research and development.

Meanwhile, Nirmal Bang believes capital allocation could rise to ₹2.1–2.3 lakh crore, implying a 20–30% YoY increase, with the share potentially moving closer to 30% of total defence spending. Motilal Oswal, moreover, expects defence expenditure to increase by around 15% over the estimated ₹1.8 lakh crore spending in FY26, even after accounting for a one-time emergency procurement of ₹40,000 crore undertaken this year.

Nuvama noted that double-digit growth in defence capital outlay could accelerate modernisation, with major programmes expected to start translating into earnings from FY27. The brokerage expects continued focus on indigenisation, higher R&D spending and exports. Priority areas are likely to include UAVs, drones, anti-drone systems, missile systems and naval platforms, with particular emphasis on the Air Force and Navy.

Emkay Global believes a sharper policy push toward aerial warfare systems would directly benefit companies involved in electronics, radar systems and defence technologies. The brokerage also pointed to opportunities in shipbuilding, highlighting the already approved ₹69,800 crore package and the need for long-term, low-cost financing support for ports and shipyards.

“The government is expected to launch the Drone Shakti Mission, featuring a 5-year, ₹10,000 crore incentive program to position India as a global manufacturing hub,” Emkay Global said.

Emkay Global: Zen Technologies, Astra Microwave Products, Data Patterns, Paras Defence, Cochin Shipyard, Mazagon Dock, Larsen & Toubro

Motilal Oswal: Bharat Electronics, Bharat Dynamics, Hindustan Aeronautics

Axis Securities: Bharat Electronics, MTAR Technologies

The rally in defence counters during the Budget week has been broad-based. MTAR Technologies surged 26%, while Garden Reach Shipbuilders advanced 23%. Data Patterns gained nearly 23%, and Apollo Microsystems rose 15%. Mazagon Dock climbed around 12%, while BDL and Cochin Shipyard were up about 10% each. BEL added 9.5%, BEML rose 9% and HAL gained 7%.

The strong performance across the sector reflects investor confidence that higher allocations and faster execution could translate into stronger order inflows and earnings momentum if Budget announcements meet expectations.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

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