Decent returns are expected from the stock market in the year 2025. Investors are also expecting sectoral growth in the coming year. Experts also believe that there will be good demand in the defense sector in the year 2025.

Investors have their eyes on some select large-cap defense stocks. From these, investors will choose which defense sector stock can grow relatively more for the year 2025.

India's defense sector has been on the path of development in the last few years supported by favorable policy initiatives by the government. The government has taken several steps to help boost domestic production, which has now reached Rs 1.3 trillion. The government plans to increase domestic production to Rs 1.8 trillion by the end of FY 2025.

Additionally, to enhance the operational preparedness of the armed forces, the Defense Acquisition Council (DAC) has approved AON (Acceptance of Necessity) of Rs 4.4 trillion as against Rs 3.5 trillion in calendar year 23, which shows a growth of 29 percent compared to the same period last year.

Brokerage firm Antique said in its report that despite defence capex remaining low in the first half of FY25 (-20% YoY), activity is expected to pick up in the fourth quarter of FY25. The brokerage said that several large orders are in the pipeline to be finalised and the government has also retained its capital expenditure budget at Rs 1.7 trillion in the budget to be presented in July 2024.

Antique maintains a positive stance on the defence sector and believes that the recent price correction in defence stocks could be a good entry point.

Antique said that India's defence sector has a large number of good companies, while the story of public sector undertakings is well understood due to their size and range of technology, the emergence of the private sector will provide huge investment opportunities. There are a large number of companies in the defence sector, which are not publicly listed but have very advanced technology.

Antik said HAL, BEL, Bharat Dynamics (BDL), Mazagon Docks and PTC Industries are its top picks from the defence sector for 2025.

Hindustan Aeronautics Ltd

Antik said HAL expects to receive the first consignment of two F-404 engines in the next few months. The commencement of engine supplies from GE Aviation is crucial for the delivery of India's indigenous light combat aircraft (LCA), Tejas Mk1A (83 to be supplied). The brokerage has set a target price of Rs 5902 on this stock.
 

Bharat Dynamics Ltd

The brokerage said that the delivery of Akash weapon system (order received in March 2023, value Rs 81.61 billion) to the Indian Army has been delayed, possibly due to delay in supply of some critical components. The brokerage believes that the situation is moving towards normalcy. It gave a target price of Rs 1357 for Bharat Dynamics.

Mazagon Dock Shipbuilders Ltd

Mazagon Dock Shipbuilders is expected to receive three additional Kalvari class submarines. Its potential value is Rs 350 billion. Along with the finalization of P75I, 6 AIP class submarines are also expected to be delivered soon. Antique has set a target price of Rs 5513 (price has not been adjusted after the split).
 

PTC Industries Ltd

Antik said that PTC Industries is an emerging global company in titanium and super alloys precision engineering. It has set a target price of Rs 19653.

Bharat Electronics Ltd

Antik said that the Ministry of Defense has given several large orders to defense public sector companies, which has helped the companies to further strengthen their already strong order book and meaningfully increase revenue visibility in the coming years. He believes that strong ordering prospects are expected to emerge in the medium term as India seeks to modernize its armed forces and also increase exports with an emphasis on Make in India. The brokerage has set a target of Rs 373 for this.