Indian defense stocks, particularly Bharat Electronics Limited (BEL) and Hindustan Aeronautics Limited (HAL), have been caught up in substantial price corrections recently, raising concerns and questions among investors. With stock prices plummeting by 12 to 21% this year alone and HAL’s shares down nearly 32% over the past six months, the narrative surrounding these stocks appears grim. Nonetheless, analysts suggest this slump could represent potential buying opportunities.
The Nifty Defence Index has also seen sharp declines, falling by 12% over one month and 23% over the past six months—strikingly worse than the broader Nifty 50 index, which dipped only 1.1% and 10% during the same periods. Given these statistics, it’s evident these defence stocks have faced much heavier setbacks than the overall market.
Yet, this significant drop has caught the attention of various brokerages and analysts, who remain optimistic about the future of these stocks for several compelling reasons. For one, the valuations of BEL and HAL have adjusted sharply, with losses of between 25-50% from their peak values earlier this year. This correction suggests to experts, including those at JPMorgan, it's time to reconsider the attractiveness of these stocks now devoid of their previous excessive valuations.
JPMorgan explicitly expressed a preference for BEL, awarding it with a target price of Rs 343, representing potential upside of around 33%. Meanwhile, HAL has been assigned a target of Rs 4,958, indicating approximately 49% upside. These ratings reveal the substantial belief among analysts about the potential recovery of these investments.
Despite the recent fluctuations, the underlying business health of these defence firms remains solid. Elara Securities noted HAL’s order book is expected to swell to between Rs 2.5 and 2.6 lakh crore by FY26, a leap from Rs 1.3 lakh crore as of December 2024. Major upcoming deals are set to include the Tejas fighter jets, the LCH Prachand helicopters, and upgrades for SU-30 aircraft, indicating sustained operational momentum. Similarly, BEL is anticipating significant contracts, including a notable missile deal boasting worth Rs 25,000 crore, alongside additional transactions expected to take place within FY26.
These projections suggest the business of HAL and BEL is not slowing down; rather, it positions them as attractive investments, even amid current declines. Analysts' sentiments reinforce this outlook, as evident from the ratings bestowed upon these stocks. Reportedly, 24 out of 27 analysts are offering 'buy' ratings for BEL, and 15 out of 16 are bullish on HAL.
Insightfully, Elara Securities highlighted their positivity for these defence firms post-Aero India 2025, pointing to increased budgetary allocations and renewed government focus on indigenisation efforts. They project substantial targets for HAL and BEL, setting respectively Rs 5,160 and Rs 370, which distinctly showcases their strategic confidence moving forward.
Other defence market players such as Bharat Dynamics Limited (BDL), Zen Technologies, and Astra Microwave have also caught analysts' attention, balanced against their operational dynamics and expected performance. Overall, it appears there might be significant trials and tribulations for defensive investments at present; nevertheless, the potential for growth alongside the strategic insights provided by seasoned analysts signal more than just passive investment waiting—it reflects opportunity for savvy investors.
Yet, with investments still carrying risks and the volatility experienced by stock prices, it is prudent for stakeholders to conduct their due diligence. This includes consulting with fully qualified brokers or financial advisors before making investment decisions, ensuring they are well-informed of the current situation.