Defence stocks soar as strategic ties deepen and Make in India gains momentum
India’s defence sector is gaining strong attention following the announcement of a new 10-year defence cooperation agreement between India and the United States. This long-term framework is expected to bring big changes not only in military ties but also in defence manufacturing, technology sharing, and the growth of Indian defence companies.
This new deal has already caused a sharp rise in the value of several defence stocks, and investors are watching closely to see what lies ahead.
India and USA Sign Strategic 10-Year Defence Agreement
India and the United States recently signed a strategic agreement that will guide defence cooperation between the two countries for the next decade. This agreement focuses on key areas such as sharing defence technology, improving joint military training, and increasing the production of advanced defence equipment in India.
It also aims to speed up the delivery of critical equipment like fighter jet engines, support joint research and development, and strengthen India’s defence manufacturing base. This agreement is an extension of previous efforts to improve military relations between the two countries and represents a big step toward deeper defence and industrial cooperation.
Positive Reaction from the Stock Market
The stock market reacted quickly to this news. On July 3, defence stocks jumped for the fifth time in six trading sessions. Companies like Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), Data Patterns, MTAR Technologies, Paras Defence, and BEML all saw their share prices rise between 0.6% and 1%. The overall defence sector has seen a rise of nearly 35% so far in 2025, compared to a much smaller 5.5% increase in the broader market.
This rally shows growing confidence in the long-term potential of Indian defence companies, especially with more government orders and international partnerships in the pipeline.
Government Spending on Defence Creates More Opportunities
A big reason behind the recent boom in defence stocks is the government’s increased spending on military equipment and upgrades. The Defence Acquisition Council (DAC), which approves major military projects, recently cleared proposals worth over ₹1 lakh crore. These include new spy planes, air defence systems, sea mines, and short-range missiles.
Such large-scale purchases are expected to directly benefit companies like BEL, HAL, Bharat Dynamics, and Cochin Shipyard, as they will likely handle most of these projects. This level of spending is also in line with the “Make in India” initiative, which aims to reduce dependence on foreign defence imports and promote local manufacturing.
Private Companies and US Partnerships Enter the Picture
Another major shift is the growing involvement of private sector companies in defence projects. Reliance Defence, a part of Reliance Infrastructure, recently signed a ₹20,000 crore deal with a U.S. company to set up a Maintenance, Repair, and Overhaul (MRO) facility for military aircraft in Nagpur. This project will create hundreds of jobs and is expected to be a key part of India’s future defence supply chain.
Such partnerships between Indian private firms and global companies show that defence production is no longer just a public sector effort. More private players are expected to enter the space, supported by new policies and government encouragement.
Advanced Indian Projects Get a Boost
Two of India’s most ambitious defence projects—the Tejas Mk-1A and the Advanced Medium Combat Aircraft (AMCA)—are also gaining attention. The Tejas Mk-1A is an improved version of India’s homegrown fighter jet and is already in production. The new India–U.S. deal is expected to speed up engine deliveries, making the production process faster.
The AMCA is a future project and will be India’s first fifth-generation stealth fighter jet. The prototype is expected to be ready by 2028 or 2029, with the first official flight likely around 2029. The full launch into service may happen by 2035. Both these projects will involve public and private firms and will need strong funding, skilled labour, and technology partnerships.
Are Defence Stocks Overpriced?
While the growth in defence stocks is exciting, analysts are warning that some of these stocks might be overvalued in the short term. Stocks like Cochin Shipyard, GRSE, and BEL have already seen large price increases, and a short-term correction or dip may be expected. This would allow for a healthier balance in the market and give new investors a better entry point.
However, many market experts believe that the sector still has strong long-term potential. The current rally is seen not just as a short-term boost but as the beginning of a longer growth phase that could last years or even decades. As India increases its focus on building its own defence industry, local companies are expected to benefit in a big way.
Global Developments Add More Momentum
This new defence agreement with the US also comes at a time when India is moving away from its long-time defence partnership with Russia. Due to global tensions and changing military needs, India is now turning to Western countries like the United States for more advanced technology and equipment.
Globally, countries are increasing their defence spending, especially after recent conflicts and geopolitical tensions. This has created a favourable environment for defence exports from India, which could open up new markets for Indian companies.
What to Watch Going Forward
Several key developments will shape the future of defence stocks:
The successful execution of projects like the Nagpur MRO facility will show how serious private-public partnerships are in defence manufacturing.
Progress in large-scale indigenous projects like the AMCA and Tejas Mk-1A will play a big role in attracting future investment.
Continued government orders from the Defence Acquisition Council will ensure a steady pipeline of work for major companies.
Steps taken to improve local supply chains, such as HAL and BEL making more parts and systems in-house, will add long-term strength to the sector.
Any fall in the prices of defence stocks in the coming weeks may offer a fresh opportunity for investors looking at long-term growth.
A Strong Future with Room for Caution
The 10-year India–U.S. defence agreement has created a major opportunity for Indian defence companies. With growing government support, international partnerships, and ambitious local projects, the sector is set for long-term growth. Defence stocks have already performed well in 2025, and the outlook remains strong.
However, smart investing requires careful attention to price levels, especially after a sharp rally. While short-term corrections may happen, the overall trend points to a strong future for India’s defence industry—one built on innovation, self-reliance, and global cooperation.
