India’s defence sector is undergoing a significant transformation driven by a record budget, rising domestic production, and a strategic push towards exports, with both public and private companies playing crucial roles in the new supply chain landscape.
India’s defence industry is in the middle of a long shift from reliance on imports towards domestic manufacturing and, increasingly, exports. That change is being reinforced by a record defence allocation of ₹7.85 lakh crore for 2026-27, a rise of 15.2% from the previous year, with capital spending up 21.8% to ₹2.19 lakh crore and 75% of that capital pool set aside for domestic procurement, according to official budget figures and reports by defence publications. In an environment shaped by modernisation needs and the aftermath of Operation Sindoor, the sector is being read less as a single-theme trade and more as a supply-chain story spanning platforms, electronics, materials and engineering services.
The scale of the opportunity is also visible in production data. India posted record defence output of ₹1.54 lakh crore in 2024-25, while exports climbed to ₹23,622 crore, according to industry and media reports. Public sector units still dominate overall production, but private companies are taking a larger share of exports, and the government has set far more ambitious targets for the years ahead. That combination of rising domestic demand, higher procurement from local suppliers and stronger export intent is what has kept listed defence names in focus.
Among the state-owned companies, Hindustan Aeronautics remains central to aircraft and helicopter programmes, while Bharat Electronics has become a key proxy for the electronics-heavy future of warfare, particularly in radar, electronic warfare and command systems. Bharat Dynamics benefits from missile orders and export opportunities, while Mazagon Dock Shipbuilders and Garden Reach Shipbuilders are linked to naval modernisation and submarine projects. Cochin Shipyard has exposure to naval work, commercial shipbuilding and maintenance, repair and overhaul, which can generate more recurring revenue over time. Mishra Dhatu Nigam stands out as a specialised materials supplier, with advanced alloys and metals increasingly important as India tries to reduce dependence on imported critical inputs.
The private-sector names bring a different profile. Bharat Forge offers defence exposure within a broader industrial business, reducing dependence on a single procurement cycle, while Solar Industries has moved beyond explosives into ammunition, propellants and rocket systems. In the mid-cap and smaller-company space, the strongest themes are electronics, simulation, drones and precision manufacturing. Zen Technologies has built a position in training systems and counter-drone tools, Data Patterns works across radars and avionics, Paras Defence spans optics and space-related applications, and Astra Microwave focuses on RF and microwave components. MTAR Technologies, Apollo Micro Systems, Dynamatic Technologies, AXISCADES and Aequs all sit in adjacent niches that could benefit as India deepens its domestic supply chain and global aerospace partners look for lower-cost manufacturing bases.
The broader backdrop still matters. Official and industry data suggest India has reduced its dependence on imported defence equipment from roughly 65% to 70% a decade ago to about 35% now, but the gap remains substantial. That leaves room for companies supplying engines, electronics, missiles, ship systems, materials and dual-use technologies such as drones and space-linked hardware. The strongest investment case, according to the material cited here, is not simply that defence spending is rising, but that policy is increasingly directing that spending towards domestic firms with the capacity to manufacture, integrate and export.
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