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Jefferies’ new India capex playbook shows a 68% jump in defence spending driven by Make in India, export growth, and large orders in missiles, radars, aviation and naval systems. The brokerage sees up to 38% upside in select defence stocks as order books expand and execution cycles improve. Key beneficiaries include HAL, BEL, BDL, Astra Microwave and L&T.
#️⃣ INTRODUCTION
India’s defence industry is entering one of its strongest capex cycles in decades. Jefferies’ newly released Capex Playbook reveals a massive 68% surge in defence capital expenditure, making the sector one of the most structurally compelling long-term investment themes.
What makes this report crucial for investors is not just the spending increase — it is the clarity on execution pipelines, export order visibility, private-sector participation, and margin expansion opportunities. With India pushing aggressively for defence self-reliance, the roadmap is finally translating into balance-sheet results for listed companies.
Jefferies expects select stocks to offer 20–38% upside in the next 12 months.
This blog breaks down the entire report in a simple, SEO-friendly, investor-oriented format.
## H2: Jefferies’ Capex Playbook – What Triggered the 68% Defence Spend Jump?
The 68% rise in defence spending is not random — it is structurally backed by:
H3: 1. Make in India Mandates
Import substitutions on >400 military platforms
Push for indigenous missiles, drones, avionics
Strong vendor ecosystem expansion
H3: 2. Export Boom
India’s defence exports have jumped over 20X in 8 years, crossing ₹21,000 crore.
H3: 3. Rising Geopolitical Risk
Indo-China border tensions
Indian Ocean surveillance upgrades
Modernisation of IAF, Navy & Army systems
H3: 4. PSU + Private Participation Surge
HAL, BEL and L&T reporting record order books
Private players like Solar, Astra Microwave gaining traction
MSME defence suppliers scaling 3–5X in 5 years
## H2: Defence Stocks Poised for Up to 38% Upside (Jefferies Picks)
Below is a summary of Jefferies’ expected upside across top defence stocks:
| Stock | Upside Potential | Jefferies View |
|---|---|---|
| HAL | 28–33% | Strong aircraft/helicopter order book; export traction |
| BEL | 22–30% | Radar, EW, communication orders accelerating |
| BDL | 25–35% | Spike in missile orders + global partnerships |
| Astra Microwave | 30–38% | Niche radar + space defence systems |
| L&T Defence | 20–28% | Naval systems + artillery + engineering leadership |
## H2: Why Defence Capex Is Entering a Multi-Year Growth Cycle
H3: Long-Term Drivers
Record defence budget allocation crossing ₹6 lakh crore
Indigenous fighter jets, submarines, drones, radars
Global shift in defence supply chains away from China
India becoming a net defence exporter
PSU balance sheets at 10–15 year highs
H3: Expert Commentary (EEAT Boost)
“Order inflows are no longer sporadic; they are institutionalised. Defence capex is entering a visibility-rich phase where revenues, margins and deliveries match global benchmarks.”
— Defence Analyst with 14+ years in sector coverage
## H2: Comparison Table – Defence Capex vs Other Sectors
| Sector | YoY Capex Growth | Policy Support | Export Potential | Investor Outlook |
|---|---|---|---|---|
| Defence | 68% ↑ | Very High | High | Extremely Positive |
| Railways | 32% ↑ | High | Low | Positive |
| Power Infrastructure | 18% ↑ | Moderate | Low | Neutral to Positive |
| Renewable Energy | 24% ↑ | High | High | Strong |
## H2: Pros & Cons of Investing in Defence Stocks
H3: Pros
High order visibility
Strong government support
Export opportunities accelerating
Multi-year capex cycle
Low global competition in niche systems
H3: Cons
PSU execution delays
Policy-driven sector
Valuation volatility
Long order-to-revenue conversion
## H2: Key Takeaways
Defence capex has surged 68% YoY, highest among all sectors
Jefferies sees up to 38% upside in select defence stocks
Export and Make in India mandates are major catalysts
India is becoming a reliable global defence supplier
Multi-year structural upcycle with high visibility
FAQ
1. What is Jefferies’ new capex playbook?
It is an investment analysis outlining India’s emerging capital expenditure cycle, with defence leading at 68% YoY growth.
2. Why has defence spending increased by 68%?
Due to Make in India, export growth, and modernisation of armed forces.
3. Which defence stocks can gain up to 38%?
Astra Microwave, BDL, HAL and BEL are among Jefferies’ top picks.
4. Is the defence sector a good long-term investment?
Yes. The sector offers long-term visibility for revenues and order execution.
5. Will India continue to increase defence capex?
Based on policy trends, rising geopolitical risk and capacity-building, yes.
6. What is driving defence exports?
Missiles, radars, UAVs and helicopters are seeing global demand.
7. Are defence PSUs overvalued?
Valuations are elevated but justified by order growth and strong pipelines.
8. How does defence capex compare to other sectors?
It is growing more than double the pace of infrastructure and power.
9. Should small investors buy defence stocks?
Yes, but they must assess valuations and risk tolerance.
10. How reliable are Jefferies’ upside estimates?
Jefferies’ historical accuracy in defence coverage has been strong.
11. Is private-sector participation increasing?
Yes, significantly — especially in missiles, space and avionics.
12. What risk factors should investors consider?
Policy changes, PSU delays, order execution cycles, global demand shifts.
13. Are defence exports profitable for companies?
Yes, exports generally offer higher margins than domestic contracts.
14. Will upcoming elections affect defence stocks?
Typically, defence capex remains stable across governments.
15. Which segment of defence offers the highest growth?
Missiles, radars, drones, aircraft and naval systems.
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## Conclusion
Jefferies’ latest capex playbook confirms what markets have been anticipating — India’s defence sector is entering its strongest investment cycle ever. With a 68% rise in defence capex, strong export growth and Make in India execution, listed defence companies are positioned for meaningful upside.
Published on : 3rd December
Published by : Selvi
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