Defence Stocks Rally After DAC Clears ₹52,000 Crore in Orders

Shares of Zen Technologies, Hindustan Aeronautics, and other defence names jumped as much as 6% on Tuesday after the Defence Acquisition Council approved capital procurement worth ₹52,000 crore. The DAC, chaired by Defence Minister Rajnath Singh, cleared the proposals under the Buy (Indian-Indigenous) category, a push for domestic manufacturing.

Zen Technologies led the pack, rising 6% on the BSE. HAL gained 3.5%, while Bharat Electronics and Cochin Shipyard added 2-3% each. The broader BSE Defence index climbed 2.2%, outperforming the Sensex.

The approvals cover a mix of platforms and systems. The largest chunk is for the Indian Navy, including next-generation corvettes and maritime patrol aircraft. The Army got clearance for anti-tank guided missiles and light combat helicopters. The Air Force's share includes upgrades for the Su-30MKI fleet and additional Astra air-to-air missiles.

Motilal Oswal, in a note Tuesday, picked three stocks to buy on the back of the DAC clearance: HAL, Bharat Electronics, and Zen Technologies. The brokerage said the order pipeline for these companies now stretches well into FY28, with the DAC's latest round adding roughly ₹15,000 crore in executable contracts over the next 18-24 months.

HAL is the most direct beneficiary. The company already has a ₹1.2 lakh crore order book, and the fresh approvals for LCH and Su-30MKI upgrades add another ₹8,000-10,000 crore in potential revenue, Motilal estimated. The stock trades at 35 times FY26 earnings, a premium the brokerage called justified given the visibility.

Bharat Electronics gets a lift from the radar and electronic warfare systems included in the Navy and Air Force packages. The company's order inflow for FY25 is now tracking above ₹25,000 crore, Motilal said, versus its own guidance of ₹22,000 crore.

Zen Technologies, a smaller play, benefits from the anti-drone systems and simulation equipment in the Army's allocation. The stock has tripled in the past year, and the DAC clearance provides fundamental support for the valuation, the brokerage argued.

The DAC meeting was the first under the new government. The ₹52,000 crore figure is roughly in line with the average quarterly clearance over the past two years, though the mix tilted more toward indigenous platforms than imported ones. Defence Secretary Giridhar Aramane said the council will meet again in October to clear another tranche.

For investors, the read-through is straightforward: the order pipeline for HAL, BEL, and Zen Technologies just got longer. The question is whether the stocks already price that in. HAL trades at 35 times forward earnings, BEL at 32 times, and Zen at 55 times. Motilal's picks assume the earnings delivery will catch up over the next three years.