The Nifty India Defence index climbed nearly 1.7 per cent  by midday on July 4 after the Defence Acquisition Council (DAC) approved indigenous capital acquisition proposals worth Rs 1.05 lakh crore. This move, led by Defence Minister Rajnath Singh gives a boost to India’s defence manufacturing ecosystem and sparked strong buying across frontline and mid-tier defence counters.

What is driving the rally?

The DAC has approved all ten proposals that are classified under the 'Buy (Indian–Indigenously Designed, Developed and Manufactured)' or Buy (Indian-IDDM) category.

The significant procurements range from Armoured Recovery Vehicles, Surface-to-Air Missile systems, Submersible Autonomous Vessels, Electronic Warfare Systems, etc.

The approval further adds momentum to the government's drive to accelerate Aatmanirbharta (self-reliance) in defence procurement and manufacture.

Top gainers in the defence pack

• Paras Defence & Space Technologies surged nearly 9 per cent to Rs 923, benefitting not just from the DAC announcement but also from its stock split that turned effective today.

• Garden Reach Shipbuilders and Engineers (GRSE) and Zen Technologies were up nearly 3 per cent each.

• Cochin Shipyard and Astra Microwave gained over 2.7 per cent.

• Mazagon Dock, Bharat Dynamics (BDL), and BEML added more than 2 per cent.

• Heavyweights like Hindustan Aeronautics Ltd (HAL) and Bharat Electronics Ltd (BEL) rose over 1 per cent, alongside Cyient DLM and Solar Industries.

Why investors are excited

The sheer scale of capital procurement — Rs 1.05 lakh crore — and the complete reliance on Indian players also shows a strong multi-year earnings visibility for key defence firms. This aligns with India’s strategic shift to reduce import dependency in critical defence equipment and create an indigenous industrial base.

Brokerages see this as a structurally positive move for companies with proven execution capability, strong balance sheets, and order book visibility.

What should investors keep in mind?

While the defence sector is seeing growing traction, especially post budget allocations and Make-in-India push, investors should adopt a selective approach. Stocks like HAL, BEL and Paras Defence are already trading at high valuations, and fresh entry should factor in earnings growth and order execution timelines.

The defence sector has been allocated over Rs 6.8 lakh crore in FY26, so the momentum in policy is clear. The DAC's decision on July 3 is a landmark decision in India's evolution to indigenous defence capacity, and the market reacted accordingly.