HAL, BEL Share Price Gain as NATO Commits to Major Defence Budget Boost

Market Performance

India's defense stocks witnessed strong momentum on Thursday, June 26, following a global shift in military spending commitments.

• HAL and BEL shares rose to 1% in the morning session.
• The Nifty India Defence Index climbed 1%, with significant contributions from Garden Reach Shipbuilders, DCX Systems, and Bharat Dynamics.
• Increased buying interest was noted in central public sector undertakings, such as Hindustan Aeronautics (HAL) and Bharat Electronics Limited (BEL).

Main News: NATO's Historic Defence Spending Push

NATO member countries have pledged a substantial rise in defense spending—from 2% to 5% of their GDP by 2035. This development is viewed as a turning point in global defense defense strategy and could lead to long-term demand for advanced defense defense systems.

"Allies commit to investing 5% of GDP annually on core defense requirements and defense-related spending by 2035," said the official NATO summit statement, signed by all 32 allied nations.

This agreement emerged amid strategic global pressures, with an emphasis on collective security and technological advancements in defense.

Company Details: HAL and BEL at the Forefront

HAL and BEL are among India's leading public sector companies in the defense sector. Their early gains today underscore their strategic importance in the industry.

These companies are expected to benefit from:

• Rising global interest in defense collaborations.
• India's increasing focus on indigenous production.
• Expanding export footprint in critical defense components like missiles, radar systems, and armored vehicles.

India's Defence Export Momentum: Key Highlights

India's defense exports have seen a dramatic surge in recent years. Here's a snapshot:

Revenue (Export Growth)

• Defense exports rose to ₹21,100 Crore in FY24, registering 46% CAGR.
• India now exports to over 85 countries.

Private Sector Contribution

• In FY2016-17: 13% of total defense exports.
• In FY2023-24: Surged to 62%, driven by private sector innovation.

Export Growth Trajectory

• Defense exports increased 13x since FY2016.
• Private sector exports alone increased 67 times in this period.

Top Exported Items

• Missiles
• Radar systems
• Armored vehicles
• Small arms
• Niche co-production support

Global Positioning & Market Share

Despite India's rise in exports, its global share remains modest:

• Between 2020 and 2024, India held a 0.2% share in global defense exports.
• However, India was the largest arms importer globally from 2019 to 2023, with a 9.8% share of imports.

Top Importers of Indian Defence Equipment

• United States
• France
• Armenia

This suggests significant untapped potential for Indian defense firms, particularly HAL and BEL, to expand in international markets.

Policy and Structural Push for HAL, BEL

India's defense strategy is undergoing a shift, with a greater emphasis on 'Make in India' and indigenization, as well as reduced import dependency.

Key drivers:

• Government initiatives to promote local manufacturing.
• Increased participation from the private sector.
• Focus on defense PSUs, such as HAL and BEL, to lead export efforts.

These steps will enhance the global competitiveness of companies like HAL and BEL.

Summary of the Article

HAL and BEL shares gained on June 26 following a major announcement from NATO allies to increase defense spending to 5% of GDP by 2035. This global shift sparked buying interest in India's defense sector, pushing the Nifty India Defence Index up by 1%.

India's defense exports have grown 13x since 2016, with the private sector now contributing 62% of total exports. HAL and BEL, as dominant players in India's public sector defense landscape, are well-positioned in this evolving ecosystem, particularly amid rising geopolitical tensions and a stronger push for Indigenous production.