Defence Stocks Surge Following EU's ₹8 Lakh Crore Rearmament Plan

New Delhi (The Uttam Hindu): Shares of defence-related companies saw a significant surge on March 7, 2025, with several frontline stocks rising up to 11 percent during intraday trading on the National Stock Exchange (NSE). The rally came after the European Union (EU) announced a ₹8 lakh crore ($850 billion) rearmament plan to strengthen its military capabilities and support Ukraine, following the suspension of US military aid to the country.

At 11:03 AM, the Nifty India Defence index, which was the top performer among the indices, rose by 2.9 percent to 5,678, in contrast to the Nifty50's modest gain of 0.21 percent. Despite the recent surge, the defence index remains 32 percent down from its 52-week high of 8,302.

Among individual stocks, Data Patterns (India) saw an 11 percent rally, reaching ₹1,299.20, while Zen Technologies hit the upper circuit limit of 10 percent, also trading at ₹1,299.20. Other notable gainers included Paras Defence and Space Technologies (up 9 percent to ₹978.45), Garden Reach Shipbuilders & Engineers (up 8 percent to ₹1,399), and Bharat Dynamics (up 7 percent to ₹1,143). Other companies such as Astra Microwave Products, Mishra Dhatu Nigam (MIDHANI), MTAR Technologies, Cochin Shipyard, Idea Forge, and Mazagon Dock Shipbuilders saw gains in the range of 4 to 5 percent.

Analysts at Elara Capital believe that Indian defence companies are poised to benefit as European Union defence manufacturers turn to Indian firms for components and subsystems. This comes after the EU’s announcement of a five-part plan to strengthen its defence industry, partly in response to concerns over diminished US support. The move offers a significant opportunity for Indian public and private defence companies, especially in the context of increasing defence exports.

India's defence exports have grown substantially in recent years, reaching a record ₹21,000 crore in FY24, a 33 percent increase from the previous year. The government has set an ambitious target of ₹30,000 crore in defence exports by FY26. The EU’s new plan presents a further opportunity for Indian companies, particularly in exporting subsystems and components to European Original Equipment Manufacturers (OEMs).

Countries like the US, France, and Armenia remain among the top importers of Indian defence products, including artillery guns, Akash air defence missiles, BrahMos missiles, radars, and bulletproof vests. Potential beneficiaries of this surge in demand include Bharat Electronics, Hindustan Aeronautics, Bharat Dynamics, Data Patterns, Zen Technologies, Paras Defence, Solar Industries, Azad Engineering, and Dynamatic Technologies, along with unlisted companies such as Vem Technologies and SMPP.

The evolving geopolitical scenario, combined with the EU’s massive rearmament plan, provides a promising outlook for India's defence sector, with an increasing focus on export opportunities for its cutting-edge military technologies.