- Global military spending reached a record $2.9 trillion in 2025, marking the 11th consecutive year of growth, according to SIPRI.
- The Nifty India Defence index is up 27% YTD and 30% in a year.
- Analysts at Ashika Institutional Equities believe global rearmament is expected to sustain momentum, prompting it to initiate coverage on the defence pack.
- Anand Rathi highlights a strong order pipeline but shifts focus to execution and valuations.
- Anand Rathi expects FY27 to be an execution-and-order-conversion year, with a bigger production inflection likely in FY28-FY29.
- Since 2015, global military spending has grown 41% in absolute terms, driven by long-term procurement programmes and heightened geopolitical tensions.
- India is undergoing a "once-in-a-generation transformation" from being one of the world's biggest defence importers to a global defence manufacturing hub.
- India's defence exports have scaled at a ~40% CAGR over FY14–FY26 to reach ₹38,400 crore, with a target of ₹50,000 crore+ by FY29.
India's defence sector is experiencing a significant transformation, driven by a global rearmament wave that has seen military spending reach a record $2.9 trillion in 2025.13
Analysts at Ashika Institutional Equities project a decade of sustained growth, with the Nifty India Defence index up 27% year-to-date.2
Military expenditure has grown at a CAGR of ~5% during CY20-CY25 and is expected to accelerate to ~10% between CY25-CY30, fueled by geopolitical tensions and national security priorities.
India is transitioning from a major defence importer to a global manufacturing hub, with defence exports projected to reach ₹75,000 crore by FY30, growing at an 18% CAGR.
Key programmes like the Quick Reaction Surface-to-Air Missile (QRSAM) and Advanced Medium Combat Aircraft (AMCA) are pivotal for the sector's growth, with execution timelines extending several years.
However, execution risks remain high, as highlighted by Anand Rathi, who notes that discussions are shifting from demand visibility to execution and order conversion.45
Investors should be cautious as large programme values may not translate into immediate revenue, with significant production inflections expected in FY28 and FY29.
Overall, FY27 is anticipated to be a year focused on execution and order conversion, with the potential for substantial growth in the coming years.
“India's defence exports have grown at ~40% CAGR to ₹38,400 crore, with AIE projecting a steeper trajectory to cross ₹75,000 crore by FY30. Meanwhile, Anand Rathi expects FY27 to be an execution-and-order-conversion year, with the bigger production inflection likely in FY28-FY29.”
