India’s push to become a global defence manufacturing powerhouse is gathering momentum, with Nuvama Institutional Equities estimating a USD 130 billion opportunity over the next five years. In its latest defence sector note, the brokerage highlights the country’s transition from being the world’s second-largest arms importer to a major exporter, backed by robust government targets and strategic modernisation initiatives.
According to Nuvama, India accounted for 8.3% of global defence imports between 2020 and 2024, as per SIPRI data. However, the government has now set a production target of ₹3 lakh crore by FY29E (versus ₹1.3 lakh crore in FY24), and an ambitious export target of ₹50,000 crore (versus ₹21,700 crore in FY24).
The Indian Air Force and Navy are expected to lead the spending, driven by large-scale modernisation programs such as the LCA Mk-IA and Mk-II, AMCA, QRSAM, Astra Mk-I & Mk-II, IMRH, and the P-75I submarine project. Nuvama pegs the pipeline of Defence Public Sector Undertakings (DPSUs) at ₹8.7 lakh crore.
A critical area of opportunity lies in defence electronics, which is expected to grow 1.5–2x the defence capital expenditure. The segment is poised for 7–8% CAGR over the next five years, bolstered by the modernisation of ageing platforms such as Su-30s, MiG-29s and Mirage-2000s with upgrades in radars, missiles, avionics, and electronic warfare capabilities.
Nuvama highlights the Indian Air Force’s squadron strength remains at 31 (versus the requirement of 42), and delays in key programs like LCA Mk-IA and AMCA could affect operational readiness, making fleet modernisation the fastest viable path forward.
Initiating coverage in the defence sector, Nuvama recommends:
- Hindustan Aeronautics (HAL) – BUY, Target Price: ₹5,150; Market Cap: ₹2.8 trillion
- Bharat Dynamics (BDL) – BUY, Target Price: ₹1,650; Market Cap: ₹516 billion
- Data Patterns – BUY, Target Price: ₹2,300; Market Cap: ₹105 billion
Nuvama believes the sector is primed for structural growth with strong policy support and increasing global interest in Indian-made defence equipment.
Disclaimer: The above views are of the broker’s and not the author or the publication’s. Please make any and every investment decision after consulting your financial adviso
