Stock analysts remained structurally positive on the prospects of defence sector, a year after Operation Sindoor, betting on India's focus on promoting its indigenous technologies and soaring defence budget. They, however, BELieve valuations at a few defence counters are stretched, with execution and earnings delivery holding the key. 

Operation Sindoor was a structural inflection point, not just militarily but as a policy and market catalyst, Saurabh Jain, Head of Fundamental Research at SMC Global Securities, adding that the domestic manufacturing push is real and multi-year. 

The government policy remained firmly supportive, evidenced by the Ministry of Defence's Rs 3 lakh crore capital outlay target by 2029. The support implies a sustained double-digit growth annually in defence capex, said ICICI Securities on Thursday.

This brokerage said the acquisition timelines are expected to be significantly compressed after the recent Defence Procurement Manual 2025. The domestic brokerage sees order awarding momentum picking up in FY27 and FY28, especially in aerospace, missiles, electronic warfare and drones, citing a changed fabric of warfare. Data showed DAC approvals were at all-time high in FY26. 

ICICI Securities identified Hindustan Aeronautics Ltd (HAL) and Solar Industries Ltd as its top defence picks. This brokerage has 'ADD' rating on Bharat Electronics Ltd (BEL) and 'Reduce' rating in Bharat Dynamics Ltd (BDL). 

Putta Ravi Kumar, Defence Analyst at Choice Institutional Equities said Bharat Dynamics Limited (BDL) and Bharat Electronics Limited (BEL) stand out as key beneficiaries of geopolitical tensions, given their roles in manufacturing and supplying multiple layers of missile-based defence systems. Their strong order visibility and strategic positioning in missile systems make them one of the more compelling plays in the current defence cycle, Kumar said while also noting that India has accelerated investments in multi-layered air defence systems. Programmes such as Sudarshan Chakra highlight this shift towards an integrated, indigenous defence architecture, he said.

Jain of SMC Global Securities said India’s defence strategy has pivoted towards strengthening air defence capabilities post post Operation Sindoor. He said Russia–Ukraine War and escalating tensions in the West Asia, have reinforced a key lesson: air defence is no longer optional, it is foundational to modern warfare. "While companies like HAL and BEL are well-positioned to benefit from the ongoing tailwinds — clearly reflected in their robust order books, investors should exercise a degree of caution on valuations, which currently appear slightly stretched," Kumar said. 

This analyst said if execution remains on track, strong earnings growth could well justify and sustain these elevated valuations over the medium term.