Defence stocks to buy or sell: Kotak expects defence upcycle to continue, prefers HAL over peers

Kotak Institutional Equities expects India's defence sector to remain in a structural upcycle, citing an 11% CAGR in defence capex over FY2026-30, a tenfold rise in Acceptance of Necessity approvals to ₹9.3 trillion during FY2021-26, and expected new orders worth ₹6.5-7 trillion during FY2027-29. The brokerage initiated Hindustan Aeronautics with an Add rating, while assigning Sell calls on Mazagon Dock Shipbuilders and Solar Industries, and maintaining Reduce on Bharat Electronics and Sell on Cochin Shipyard due to demanding valuations; the sector trades at around 50x forward earnings versus 28x for global peers. India defence exports are projected to reach the government target of ₹500 billion by FY2029, and the military drone market is estimated to expand from $30 billion in CY2024 to $75 billion by 2029.