HAL, BEL, BDL, Zen Technologies to GRSE: Is defense the new IT for the Indian stock market?

Indian stock market: For nearly two decades, Indian equity markets were largely driven by the rise of the information technology (IT) sector. Companies such as Tata Consultancy Services (TCS), Infosys and Wipro became symbols of India’s global outsourcing success and long-term wealth creation on Dalal Street. However, after the outbreak of the Russia-Ukraine war, IT stocks have failed to meet investors’ expectations and have largely been major casualties in the last four years’ stock market crashes. Over the past four years, defense stocks have delivered stellar returns to shareholders.

The Indian defense major Bharat Dynamics Ltd has surged from around ₹215 ₹1355 per share in the last four years, delivering a more than 500% return to its shareholders. The BEL share price skyrocketed from ₹67 to ₹470 in the last four years, delivering over 600% return to its shareholders. Shares of Hindustan Aeronautics Ltd or HAL skyrocketed from ₹657 a piece to ₹4,030 per share, logging over 500% rise in the last four years.

In the small-cap segment, defense stock Apollo Micro Systems’ share price surged from ₹12 to ₹221.50 apiece, delivering around 1750% return to its shareholders in the last four years. Similarly, Zen Technologies shares surged from ₹196 ₹1,429 apiece on the NSE, delivering over 625% return to its investors. GRSE share price skyrocketed from ₹219.50 to ₹2,530 per share, delivering an over 1,000% return to its shareholders over the last four years.

Amid rising tensions over a US-Iran war and President Donald Trump now shifting his focus to Cuba, Dalal Street is abuzz over whether defense has become a new IT for the Indian stock market. According to stock market experts, the IT sector faces new pressures from artificial intelligence (AI) disruption, slowing global tech spending, and currency volatility. Investor attention is increasingly turning toward another strategic industry — defense manufacturing. They said that the defense segment is driven by geopolitical tensions, and the strong order book of Indian defense companies signals strong earnings visibility. They predicted IT as a long-term growth structure in the Indian defense segment.

Geopolitical tension fuels order book, earnings visibility

Expecting the growth story in the defense stocks to sustain, Hariprasad K, SEBI-registered Research Analyst and Founder at Livelong Wealth, said that, unlike many sectors that move purely with economic cycles, defense is largely driven by geopolitical realities. Rising tensions across regions such as the Middle East, Eastern Europe and the Indo-Pacific have triggered a global surge in defense spending.

Highlighting the earnings visibility on strong order book strength, Hariprasad K said, “One of the strongest arguments supporting the ‘defense as the new IT’ narrative lies in earnings visibility. IT companies are highly dependent on global corporate spending cycles, which can fluctuate during economic slowdowns. Defense companies, on the other hand, operate with long-term government contracts and multi-year order books, often stretching five to ten years.”

“Episodes of conflict and strategic uncertainty often trigger short-term rallies in companies linked to military equipment, shipbuilding, electronics, and aerospace. In India, this momentum is further supported by structural factors, including the government’s strong push for defense indigenisation, rising defense budgets, and increasing exports. India’s defense production has crossed record levels and exports have surged significantly over the last decade, reflecting a structural shift. towards a domestic defense manufacturing ecosystem,” said Ponmudi R, CEO at Enrich Money.

The Livelong Wealth expert said that companies such as Hindustan Aeronautics Limited, Bharat Electronics Limited, and Mazagon Dock Shipbuilders Limited are currently sitting on record order pipelines, offering far greater revenue visibility than sectors reliant on discretionary spending.

India’s growing defense export ambition

“Another major structural shift is India’s emergence as a defense exporter. Defense exports have surged to ₹23,622 crore in FY2024–25, a dramatic rise from less than ₹1,000 crore a decade ago. The government has set an ambitious target of ₹50,000 crore in defense exports, which could significantly diversify revenue streams for domestic defense companies and reduce dependence on domestic procurement,” said Hariprasad K of Livelong Wealth.

Hariprasad K said the comparison between defense and IT does not necessarily imply that the defense sector will replicate IT’s export scale. Instead, the analogy reflects a similar long-term structural growth cycle.

“Just as IT stocks benefited from the global outsourcing boom of the early 2000s, defense is now supported by a powerful combination of geopolitical realities, government policy support and rising global military spending. These are structural drivers that tend to persist over decades rather than quarters,” said Hariprasad K of Livelong Wealth.

Should you sell IT and buy defense stocks?

Whether one should prefer defense stocks over IT shares, Khushi Mistry, Research Analyst at Bonanza, said that defense remains in focus during a war-like situation, but many forget that when the war ends, the actual capital and capex come into the picture, supported by the government as well as export orders, as countries tend to strengthen their defense equipment.

“With the kind of environment we are living in, it would be fair to assume that defense is something everyone is focusing on, and with companies having multi-year revenue visibility that is also increasing on a sequential basis. Hence, all of this augurs well for the sector,” said Khushi Mistry of Bonanza.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.