Booster shot to Indian defence sector from European Commission’s ReArm plan: HAL, BEL among 6 stocks to buy

The European Commission has announced a major defence initiative, the ReArm Europe Plan, in response to the rising security threats. Analysts believe that the European defence spending will boost Indian defence stocks, particularly Bharat Electronics and HAL among others.

Further, the government spending on infrastructure and capital goods remains strong, and private sector capacity expansion is also increasing.

Here is what experts have to say about the sector’s outlook:

Nilesh Shah, MD & CEO, Envision Capital

In an interaction with ETNow, Nilesh Shah stated how the government’s spending on infrastructure and capital goods remains strong, and private sector capacity expansion is also increasing.

He noted that there has been a slowdown in fresh defence orders recently, but a surge in orders is expected by the end of this financial year or the beginning of the next. Sectors like aerospace and space technology have seen certain companies develop strong engineering and manufacturing capabilities, making them key players in both domestic and global markets.

Shah stated that infrastructure and defence sectors face execution-related delays, due to which, investors should take a long-term view (2-3 years) rather than focusing on short-term fluctuations.Additionally, following the recent correction, stocks in capital goods, capex, and defence are now more attractive for long-term investors.Also read: Sunil Subramaniam decodes sectors amid volatile markets: What to buy, sell, hold?

Chakri Lokapriya, CIO-Equities, LGT Wealth

Chakri Lokapriya believes that the European Commission’s major defence initiative, along with increased spending by European countries and the UK due to the Ukraine war, will benefit Indian defence companies.

Large defence firms like Bharat Electronics (BEL) and Hindustan Aeronautics (HAL), as well as smaller component manufacturers, are poised to gain from this increased spending.

Lokapriya stated that the recent corrections in defence stocks were due to uncertainty over long-term growth rates. However, with Europe committing to defence spending over the next 10 years, growth expectations for Indian defence firms are likely to be revised upwards.

ICICI Securities

Domestic brokerage firm ICICI Securities too believes that the European Commission’s ReArm Europe Plan will give a boost to the Indian defence companies as it highlighted Solar Industries, PTC Industries, Dynamatic Technologies and Azad Engineering as the key beneficiaries of such a policy, with ‘buy’ ratings on all these stocks.

The brokerage firm has a target price of Rs 13,720 for Solar Industries, Rs 20,070 for PTC Industries, Rs 9,330 for Dynamatic Technologies and Rs 2,350 for Azad Engineering.

President Ursula von der Leyen proposed a five-point plan, dubbed ReArm Europe, to help pay for more security spending – ahead of a meeting of EU leaders in Brussels on 6 Mar’25.

“In our view, the higher spending by EU on defence bodes well for India’s defence players who have established relationships with EU players such as Solar Industries, PTC Industries, Azad Engineering and Dynamatic Technologies,” said ICICI Securities in its report.

Also read: Domestic, foreign investors yet to make a big comeback to India; get set for a volatile year: Punita Kumar Sinha

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)