BEL, Paras, BHEL: Defence Stocks Surge Up To 5.3% After DAC Clears Rs 52,000-Crore Acquisition Proposals

Defence-related stocks traded higher in early deals on Monday after the Defence Acquisition Council (DAC) approved capital acquisition proposals worth about Rs 52,000 crore, boosting investor sentiment towards companies linked to the sector.

At around 10:30 am, Paras Defence and Space Technologies was the top gainer among major defence counters, rising 5.28% to Rs 1,362.30. Bharat Electronics (BEL) climbed 1.73% to Rs 425, Mazagon Dock Shipbuilders added 1.08% to Rs 2,571, while Hindustan Aeronautics (HAL) advanced 1.06% to Rs 4,475.10. The Nifty India Defence index was up 1.28% at 9,696.75.

The rally came after the DAC granted Acceptance of Necessity (AoN) for a series of defence procurement proposals designed to strengthen the capabilities of the Army,

Navy and Air Force.

The approvals include the procurement of several indigenous defence systems such as the Akash Tarang anti-drone electronic warfare system, man-portable anti-tank guided missiles (MPATGM), medium-range surface-to-air missile (MRSAM) systems, very short-range air defence systems (V-SHORADS), active protection systems for tanks and jet-powered loitering munitions.

For the Navy, the council also approved proposals for multi-influence ground mines, naval shipborne unmanned aerial systems (UAS) and the creation of a Land Based Testing Facility (LBTF) for electric propulsion systems.

Apart from the broader sector rally, Bharat Heavy Electricals (BHEL) also remained in focus after JM Financial Institutional Securities reaffirmed its ‘Buy’ rating on the stock with a target price of Rs 435.

The brokerage said the government’s decision to permit four Chinese electrical equipment companies to participate in PSU tenders for high-voltage transformers and gas-insulated switchgear (GIS) is unlikely to materially affect BHEL’s business.

It added that the proposed Land Based Testing Facility for the Navy could open up fresh opportunities for BHEL, given its expertise in electric propulsion systems.

JM Financial expects BHEL to report June quarter revenue of Rs 66 billion, reflecting a 20% year-on-year increase. It also forecasts an EBITDA margin of at least 1.9% and expects the company to return to profitability in the first quarter after reporting losses in the corresponding period for the previous eight years.

Over FY26 to FY28, the brokerage estimates BHEL’s revenue, EBITDA and profit after tax will grow at a compound annual growth rate (CAGR) of 21%, 57% and 71%, respectively.

An Acceptance of Necessity is the government’s preliminary approval for a defence procurement proposal. It initiates the acquisition process but does not amount to a final order. Procurement contracts are awarded only after the completion of tendering, technical evaluations and commercial negotiations.

Brokerage firm Choice Institutional Equity in its note said, “We believe the Rs 520 Bn DAC approval reinforces a structural growth cycle for India’s defence sector, rather than a one-off trigger. The continued focus on indigenisation and technology-led procurement is anticipated to drive steady order visibility over the next 12–24 months. We remain positive, with BHE as a consistent compounder and BDL as a direct play on missile-led growth, while drones and electronic warfare add further long-term upside.”

It added that from a sector standpoint, the opportunity is largely concentrated in air defence and missile systems, which could account for a significant portion of the outlay.

“In this context, Bharat Electronics Ltd emerges as a core beneficiary, likely to capture significant share of over Rs 200 billion, given its strong positioning in radars, electronic warfare and system integration, enabling participation across multiple platforms. In our view, Bharat Dynamics Ltd is well-positioned to emerge as a key beneficiary of the missile-heavy procurement mix, particularly across MRSAM, V-SHORADS and MPATGM programs. We estimate BDL’s addressable opportunity within this cycle at Rs 120-180 billion, forming a meaningful share of the broader Rs 250-300 Bn air defence and missile opportunity. While the exact conversion will depend on contract structuring and localisation dynamics, we believe the pipeline offers strong medium-term visibility, with order inflows likely to scale up over FY27-FY28 as approvals convert into executable contracts,” Choice stated.