HAL, BEL Shares Rise as NATO Pushes Global Defence Spending; Nifty India Defence Up 1%
Introduction:
HAL : Shares of Indian defence majors Hindustan Aeronautics Ltd (HAL) and Bharat Electronics Ltd (BEL) gained up to 1% in Thursday’s early trade after a major policy shift by NATO. The North Atlantic Treaty Organization (NATO), under growing geopolitical pressure, announced a significant hike in defence spending—from 2% to 5% of GDP by 2035. This bold move is expected to reshape global defence priorities, giving Indian defence manufacturers a broader global opportunity.
The Nifty India Defence Index also reflected investor optimism, climbing 1% with key contributors like Garden Reach Shipbuilders, Bharat Dynamics, and DCX Systems joining the rally. The surge comes amid India’s expanding role in global arms exports and a rising push for indigenous defence production.
NATO’s Strategic Shift: A Game-Changer for Global Defence
At the recently concluded summit, all 32 NATO member countries pledged to allocate 5% of their GDP annually towards core defence requirements and related spending by 2035. This decision follows sustained pressure from former U.S. President Donald Trump, who has consistently urged NATO allies to increase defence commitments.
In the joint statement, NATO leaders reaffirmed their “ironclad commitment” to collective defence and acknowledged the rising security threats across the globe. This strategic pivot is anticipated to unlock unprecedented global defence investments, opening export opportunities for countries like India.
India’s Defence Industry: Rising to the Global Challenge
India’s defence manufacturing ecosystem has matured significantly in recent years. Defence exports from India have soared 13x since FY16, with a staggering 46% compound annual growth rate. This impressive leap has been largely led by the private sector, whose share in total defence exports surged from 13% in FY17 to 62% in FY24.
The Make in India initiative, coupled with increased government focus on indigenisation, has enabled the country to reduce its reliance on imports. Now, 75% of defence procurement is done domestically.
A recent InCred Equities report highlights the potential of Indian defence exports reaching ₹5 lakh crore by FY29. The current export value stands at ₹21,100 crore, comprising key items like missiles, radar systems, and armoured vehicles shipped to over 85 countries. Notably, India exports defence systems to countries like the US, France, and Armenia.
Global Market Potential: Room for Indian Players to Expand
Despite the robust growth, India remains a small player in global defence exports, contributing just 0.2% to total exports between 2020–2024. On the flip side, India continues to be the world’s largest arms importer, accounting for 9.8% of global imports in 2019–23.
This contrast highlights the significant room for growth and opportunity for Indian companies to expand their global footprint. InCred Equities notes that dominant players like the US (43%) and France (9.6%) control the majority of global defence exports, but India’s improving capability and strong policy support could help bridge this gap.
Government Support Boosting Sentiment
The Indian government is aggressively promoting defence indigenisation through policy incentives, production-linked schemes, and public-private partnerships. Defence PSUs like HAL and BEL, along with agile private players, are increasingly focused on scaling up production and improving quality to meet global standards.
The increased demand from NATO countries—especially for radar systems, small arms, and joint production projects—can provide Indian firms an opening to become reliable defence partners globally.
Financial Snapshot of Leading Indian Defence Companies
| Company | CMP (₹) | Market Cap (₹ Cr) | P/E Ratio | ROE (%) | Debt to Equity | FY24 Revenue Growth (%) |
|---|---|---|---|---|---|---|
| Hindustan Aeronautics (HAL) | 4,844 | 3,23,000 | 38.1 | 28.6 | 0.05 | 18.3 |
| Bharat Electronics (BEL) | 289 | 2,12,000 | 36.7 | 23.4 | 0.02 | 20.5 |
| Bharat Dynamics (BDL) | 1,538 | 28,000 | 41.2 | 19.8 | 0.03 | 15.2 |
| Garden Reach Shipbuilders | 1,591 | 18,000 | 32.5 | 21.7 | 0.01 | 22.7 |
| DCX Systems | 317 | 2,800 | 33.3 | 16.9 | 0.08 | 24.0 |
Conclusion
The NATO-led hike in global defence budgets offers an unprecedented opportunity for Indian defence companies. With India’s growing defence manufacturing base, favourable government policies, and a push toward self-reliance, players like HAL and BEL are well-positioned to ride this wave of global demand. Investors have already started recognizing this potential, as evident in the stock price movements and the broader rise in the Nifty India Defence Index.
Frequently Asked Questions (FAQs)
Q1. Why are HAL and BEL shares rising today?
A1. Shares of HAL and BEL are rising following NATO’s announcement to increase defence spending to 5% of GDP by 2035, which is expected to boost global demand for defence equipment and benefit Indian exporters.
Q2. What is the impact of NATO’s decision on Indian defence companies?
A2. The NATO decision creates significant export opportunities for Indian defence firms by expanding the global defence budget, especially for products like missiles, radars, and support systems.
Q3. How has India’s defence export sector performed in recent years?
A3. India’s defence exports have grown 13x since FY16, reaching ₹21,100 crore in FY24. The private sector now contributes over 60% to total defence exports.
Q4. Which Indian defence stocks gained after the NATO announcement?
A4. HAL, BEL, Bharat Dynamics, Garden Reach Shipbuilders, and DCX Systems saw gains, pushing the Nifty India Defence index up by 1%.
Q5. What is the potential of Indian defence exports in the coming years?
A5. According to InCred Equities, India’s defence exports are projected to reach ₹5 lakh crore by FY29, driven by policy support, increased production, and global demand.
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