Despite a record ₹7.85 trillion defence outlay, the Union Budget 2026 lacked fresh policy cues, triggering sharp selloffs across defence stocks on Dalal Street.
Shares of defence companies fell sharply on 1 February, at noon, after the Union Budget 2026 offered no sector-specific policy announcements, despite a steep rise in overall defence spending.
The market reaction weighed on stocks such as Bharat Electronics, Hindustan Aeronautics, Bharat Dynamics, and Data Patterns during the session.
The decline came even as the government raised defence allocation to a record ₹7.85 trillion for FY 2026-27, up nearly 15% from ₹6.81 trillion in FY 2025-26. The increase reaffirmed the Centre’s focus on military preparedness, modernisation and the welfare of defence personnel.
However, investors appeared disappointed by the absence of fresh policy signals or execution timelines in the Finance Minister’s Budget speech.
According to Budget documents, the defence outlay for FY 2026-27 includes revenue expenditure for defence services, capital spending, defence pensions and allocations for civil establishments under the Ministry of Defence.
Defence remains one of the largest components of total government expenditure.
Market expectations had been running higher ahead of the Budget. Several brokerages had projected an increase of up to 30% in defence spending, with a sharper tilt towards domestic procurement, research and development, and large modernisation programmes. The lack of explicit announcements on these fronts weighed on sentiment.
Despite the long-term narrative, defence stocks saw steep intraday losses. Garden Reach Shipbuilders & Engineers plunged 14% to ₹2,382, while Data Patterns (India) dropped 13.5% to ₹2,310.60. Paras Defence and Space Technologies fell over 12% to an intraday low of ₹625.05.
Other major names, including Hindustan Aeronautics, Cochin Shipyard, Mazagon Dock Shipbuilders, Bharat Electronics, BEML and Bharat Dynamics, declined around 10% each. MTAR Technologies slipped 6%, while Apollo Micro Systems fell 5%.
In a Mint report, Analysts said the sell-off reflects short-term disappointment rather than a reversal of the sector’s longer-term prospects, which remain linked to sustained defence spending and indigenisation goals.
