Defence stocks are having their moment in the limelight, with most seeing a rally in the aftermath of the India-Pakistan ceasefire understanding, following Operation Sindoor. The Nifty India Defence index has seen a rise of nearly 16% since April 22.

Amid these developments, Jefferies is considerably bullish on the sector, and pointed to Hindustan Aeronautics Ltd.—the counter which accumulated the largest market capitalisation in the sector since the attack—as well as Data Patterns (India) Ltd. as their favoured picks in the space. Bharat Electronics Ltd. also continues to be a preferred stock for the brokerage.

Indigenisation focus in the space has been on an upwards spree since fiscal 2014, with companies posting a double-digit rise in revenue, Jefferies pointed out.

Defence spending has picked up since December 2024, which saw a 37% yearly increase, said the brokerage, adding that March 2025 needs to rise 25% to meet fiscal 2025 budget of 3% rise.

On optimism over order book visibility of the defence counters, Jefferies sees a pipeline-backed double-digit compound growth in earnings per share in the medium-term horizon, alongside healthy returns on equity and capital employed.

On Defence’s Strong Q4 Performance

Hindustan Aeronautic’s margins for the final quarter of fiscal 2025 surpassed Jefferies’ estimates and offset the weakness in revenue. Garden Reach Shipbuilders and Engineers Ltd.’s profit after tax and Ebitda were both up two times over street expectations. While, Paras Defence and Space Technologies Ltd. also surpassed Dalal Street expectations in terms of revenue and Ebitda rise, the brokerage said.

Cochin Shipyard Ltd. bucked the trend to report a miss in metrics, it noted.

Global Defence-o-nomics

World military spending in 2024 collectively rose 9.4% on an annual basis, which marks the highest it has been since the Cold War, revealed Jefferies’ note.

Notably, Europe and the United Kingdom have discussed a sharp increase in defence spending after President Trump paused all military aid to Ukraine, it said.

. Read more on Markets by NDTV Profit.Indigenisation focus in the space has been on an upwards spree since fiscal 2014, with companies posting a double-digit rise in revenue, Jefferies said.  Read MoreMarkets, Business, Notifications 

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