₹7.85 Lakh Cr Defence Budget: Bharat Electronics and 6...

Synopsis:- The ₹7.85 lakh crore defence allocation for FY27, up 15.2% year-on-year, includes an 18% rise in capital procurement to ₹2.19 lakh crore and a 62% jump in equipment spending to ₹82,200 crore. Despite the market drop, long-term manufacturing prospects remain strong.

Finance Minister Nirmala Sitharaman announced a major increase in defence spending during Budget 2026. The government has set aside Rs 7.85 lakh crore for defence in the financial year 2027, which is 15.2% more than last year’s allocation of Rs 6.81 lakh crore.

What Goldman Sachs Says

Goldman Sachs, a leading global investment bank, released a report identifying which defence companies could benefit from this increased spending. The budget allocation actually came in higher than what Goldman Sachs had predicted. They had estimated Rs 7.75 lakh crore, but the government announced Rs 7.85 lakh crore.

Top Beneficiaries Identified

According to Goldman Sachs, several defence companies are in a good position to gain from this budget. The bank highlighted that spending on weapons and equipment is going up significantly, which will help specific companies.

The report pointed out that companies making missiles, ammunition, radar systems, and electronic equipment will benefit the most. The budget for “other equipment” – which includes all these items – jumped by a massive 62% to Rs 82,200 crore.

Breaking Down the Numbers

The overall defence budget grew 7% compared to last year’s revised estimates. More importantly, the money set aside for buying new equipment and weapons (called capital procurement) increased 18% to Rs 2.19 lakh crore. This is higher than Goldman Sachs’s own estimate of Rs 1.97 lakh crore.

The previous year’s defence spending also went up 8% compared to what was originally planned, showing the government’s strong focus on strengthening military capabilities.

Tax Relief for Aircraft Parts

The budget also removed customs duty on raw materials used to make aircraft parts and engines. This tax exemption will reduce costs for companies manufacturing aerospace components, making their products more competitive.

Surprising Market Reaction

Despite the positive budget announcements, defence stocks actually fell sharply on Sunday. The Nifty India Defence Index, which tracks major defence companies, saw a dramatic reversal. After climbing during the day, it ended with losses.

The total market value of defence companies dropped by over Rs 60,000 crore in just one day. This suggests investors may have already priced in the budget increase, or they’re waiting to see how the spending actually translates into orders.

Looking Ahead

While the immediate market reaction was negative, the long-term outlook remains positive for defence companies. The consistent increase in defence budgets shows the government’s commitment to building domestic defence manufacturing capabilities.

As orders start flowing from this increased budget allocation, the companies identified by Goldman Sachs could see improved business performance in the coming months.

Company NameComponents Manufactured by them Solar IndustriesExplosives and ammunition Bharat ElectronicsElectronics and radar systems Bharat DynamicsMissiles and defence systems Data PatternsElectronics and software Astra Microwave ProductsMicrowave components PTC IndustriesAerospace components Azad EngineeringAerospace parts manufacturing

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