The Indian defence sector is growing very fast in recent years. With the government focusing more on Make in India and increasing defence production, many investors are now showing interest in defence stocks.
These companies are expected to do well in the future because India wants to reduce dependence on foreign countries for defence needs and become self-reliant.
What’s more interesting is that some of these defence companies have strong support from Foreign Institutional Investors (FIIs), who invest after doing deep research.
Their high stake shows that they have trust in the future growth of these companies. In this article, we will share the Top defence stocks where FIIs hold up to 18% stake. If you are planning to invest in this booming sector, then these stocks can be a good option to keep in your watchlist.
Top 5 Defence Stocks in India
Here are five defence companies in India with strong FII holdings and high growth potential. These stocks are worth watching as the sector continues to expand rapidly.
| Company Name | Market Capitalization (Rs. Cr.) |
|---|---|
| Bharat Electronics Limited (BEL) | 2,33,145.40 |
| Azad Engineering Limited | 10,743.82 |
| Kavveri Defence and Wireless Technologies Ltd. | 88.55 |
| Data Patterns (India) Limited | 13,358.33 |
| Hindustan Aeronautics Limited (HAL) | 2,97,136.73 |
1. Bharat Electronics Limited (BEL)
Bharat Electronics is one of India’s largest defence public sector companies, established in 1954. It is involved in designing, developing, and manufacturing advanced electronic products for defence and aerospace sectors. Bharat Electronics Limited, also known as BEL, is one of the top defence companies in India.
It is a government-owned company that makes many important defence products like radars, communication systems, night vision devices, and other electronic equipment used by the Indian Armed Forces. BEL plays a very important role in supporting India’s goal of becoming self-reliant in defence under the ‘Make in India’ and ‘Atmanirbhar Bharat’ programs. The company has strong order books from both Indian and international clients.
It has shown steady growth over the years and is considered financially strong. Foreign Institutional Investors (FIIs) also believe in the future of BEL, which is why many of them have invested in it. For investors looking to invest in the defence sector, BEL is one of the best companies to keep on their watchlist.
- FII Holding (Mar 2025): 17.55%
- Other Holdings: Promoters – 51.14%, DIIs – 20.87%, Public – 10.43%
This high FII interest reflects strong trust from foreign investors in the company’s long-term growth.
2. Azad Engineering Limited
Established in 1983, Azad Engineering is known for making high-precision aerospace and turbine components. It serves global clients in defence, aerospace, energy, and oil & gas sectors.
- FII Holding (Mar 2025): 14.23%
- Other Holdings: Promoters – 60.32%, DIIs – 8.23%, Public – 17.21%
The stock’s recent price jump and strong FII backing indicate positive investor sentiment.
3. Kavveri Defence and Wireless Technologies Limited
This small-cap company, founded in 1991, focuses on wireless communication and defence equipment. It provides RF and antenna solutions for telecom and defence applications.
- FII Holding (Mar 2025): 13.01%
- Other Holdings: Promoters – 15.14%, DIIs – 0.02%, Public – 71.84%
Despite being a small-cap, high FII interest shows growing investor confidence in its niche offerings.
4. Data Patterns (India) Limited
Founded in 1985, Data Patterns designs and manufactures high-performance electronic systems for defence and aerospace. Its solutions include radar, electronic warfare, avionics, and communication systems.
- FII Holding (Mar 2025): 12.75%
- Other Holdings: Promoters – 42.41%, DIIs – 7.36%, Public – 37.47%
Its strong technical expertise and growing order book make it an attractive pick for long-term investors.
5. Hindustan Aeronautics Limited (HAL)
Established in 1940, HAL is a major player in India’s aerospace and defence industry. It develops and manufactures aircraft, helicopters, and related systems.
- FII Holding (Mar 2025): 12.08%
- Other Holdings: Promoters – 71.68%, DIIs – 8.26%, Public – 7.97%
HAL’s leadership position and high FII stake reflect strong global trust in its defence capabilities.
Advantages of Investing in Defence Stocks with High FII Holdings
1. Strong Foreign Investor Confidence: When Foreign Institutional Investors (FIIs) invest in a company, it shows they trust the company’s future growth. High FII holdings mean these defence stocks are globally recognised and trusted.
2. Growing Defence Sector in India: India is focusing more on defence and self-reliance (Atmanirbhar Bharat). This gives defence companies more government support and big orders, which can help their business grow faster.
3. Long-Term Growth Opportunity: Defence companies usually get long-term contracts. This gives them steady income and better chances of long-term growth for investors.
4. Less Competition, More Stability: Defence is a specialised sector with limited companies. This gives these companies a stable position in the market and helps avoid too much competition.
5. Export Potential: Many Indian defence companies are now exporting their products to other countries. This increases their earnings and gives extra growth.
6. Good Support from Government: The Indian government is promoting local defence manufacturing under the “Make in India” mission. This gives companies more chances to grow and perform better.
How Defence Stocks Perform in Economic Downturns
During economic downturns, most industries suffer, but defence stocks often stay strong. This is because defence companies get long-term government contracts and regular payments. Even when the economy is slow, the government doesn’t reduce defence spending much, as national security is always a top priority.
Also, during global tensions or border issues, defence stocks may rise because the government increases military budgets. For example, after the 2019 Pulwama attack, India raised its defence focus, helping defence-related companies grow.
These stocks are seen as safe options during uncertain times, as they offer more stability and less risk than many other sectors. So, investors looking for steady returns during bad market conditions often prefer defence stocks.
Risks of Investing in Defence Stocks in India
Before investing in defence stocks, it’s important to understand the risks. These companies mainly depend on government spending, so if the government changes its defence budget or priorities, it can badly affect their profits. Defence companies also follow many strict rules, and if any law or regulation changes, it can increase their costs or delay work.
Many defence firms also deal with foreign countries, so if political relations become weak or tensions rise, their contracts can get cancelled or delayed. Even though defence is usually stable, during big economic problems, the government may reduce its defence spending, which can hurt these companies.
Also, defence technology changes fast, and if a company does not upgrade or invest in new technology, it may lose business. Some people may also avoid investing in defence companies due to ethical concerns, especially if their products are used in controversial situations. This can affect the company’s public image and stock price.
Conclusion
Investing in defence stocks can offer steady returns, especially during uncertain times, as these companies often have long-term government contracts and stable income sources. However, it’s important to consider the risks, such as dependence on government spending, changes in regulations, and geopolitical tensions.
While the sector offers growth potential, investors must also be mindful of factors like technological innovation and ethical considerations. By carefully evaluating these aspects, investors can make informed decisions about whether to add defence stocks to their portfolio. Always remember, like any investment, defence stocks come with their own set of opportunities and risks, and it’s crucial to stay updated on market trends and government policies.