Defence Stocks Fire Up: Apollo Micro, Zen Tech, Garden Reach Among 23 Stocks That Surged up to 61% in May

Mumbai, May 31, 2025 — India’s defence sector stocks are having a blockbuster 2025—and May was no exception. As geopolitical tensions, rising government spending, and Make in India initiatives drive investor sentiment, a clutch of 23 listed defence-related stocks surged sharply during the month. Leading the rally were Apollo Micro Systems, Zen Technologies, and Garden Reach Shipbuilders, which delivered stunning gains of up to 61%, outperforming both the benchmark indices and most other sectors.

With the defence theme becoming increasingly central to India’s strategic and economic narrative, Dalal Street is seeing a rush of capital into companies tied to defence production, infrastructure, electronics, and simulation technologies.

Sector Rally Snapshot – May 2025

BSE Defence Index rose nearly 18% in May, against the Nifty 50’s 3.2% gain during the same period, reflecting strong institutional interest in this high-growth, policy-driven segment.

What’s Driving the Surge?

1. Increased Defence Budget Allocation

India’s Union Budget for FY26 saw a 12.4% increase in capital outlay for defence modernization, touching an all-time high of ₹1.84 lakh crore. This includes procurement of indigenous arms, aircraft, naval vessels, and other equipment under the Atmanirbhar Bharat initiative.

Such sustained capital spending has offered strong earnings visibility for domestic defence suppliers, both public and private.

2. Policy Push: Make in India and DAP 2020

With the Defence Acquisition Procedure (DAP) 2020 emphasizing ‘Buy Indian – IDDM’ (Indigenously Designed, Developed, and Manufactured), foreign vendors must now partner with Indian firms, boosting domestic value addition.

The government's insistence on phased manufacturing programs (PMP) has catalyzed order flows to domestic players, particularly MSMEs and mid-cap listed firms like Apollo Micro and Paras Defence.

3. Export Growth and Global Orders

India’s defence exports reached a record ₹21,000 crore in FY25, up from ₹16,000 crore the previous year. HAL, BEL, and Zen Technologies are among the biggest beneficiaries of overseas contracts, supplying to Southeast Asia, Africa, and Latin America.

The export angle has turned defence into a global growth story for India Inc.

4. Rising Geopolitical Tensions

With growing regional tensions in the Indo-Pacific and along the India-China and India-Pakistan borders, there is heightened focus on military preparedness and modernization, prompting faster decision-making and approvals within the Ministry of Defence.

The Russia-Ukraine and Israel-Hamas conflicts have also reinforced the importance of local defence resilience, leading to faster execution of domestic procurement programs.

Stock-Specific Highlights

Apollo Micro Systems Ltd (₹137.80 | +61%)

A provider of mission-critical defence electronics systems, Apollo Micro rallied on expectations of large defence electronics and radar sub-system orders. The company recently bagged a ₹252 crore order from Bharat Electronics Limited (BEL) for customized embedded systems.

It also inaugurated a new manufacturing unit in Hyderabad with enhanced production lines for aerospace components and radar control systems, boosting its execution capacity.

Zen Technologies Ltd (₹1,252.40 | +54%)

Zen Technologies continues to ride high on the global surge in demand for training simulators for military and paramilitary forces. In May, the company announced fresh orders worth ₹340 crore, including exports to the Middle East.

Its portfolio of combat training systems, anti-drone technologies, and simulators for armored vehicles and artillery continues to expand rapidly.

Garden Reach Shipbuilders (₹956.25 | +47%)

The Kolkata-based PSU delivered a stellar month after signing an MoU with the Philippine Navy for the export of two warships. Domestically, it received clearance to commence production of next-gen corvettes under Project 28.

The company’s order book now exceeds ₹29,000 crore, covering over 20 vessels under construction.

Broader PSU Defence Participation

Major defence PSUs like HAL, BEL, BDL, and Mazagon Dock continued their upward trajectory in May, driven by robust financial results and solid order books.

• HAL posted a 14% jump in Q4 profits and declared a 150% final dividend.

• BEL reported a record ₹20,000 crore order inflow in FY25.

• BDL signed a contract with the Indian Army for the supply of Akash missiles worth ₹1,200 crore.

• Mazagon Dock received Ministry of Defence approval for submarine life-cycle support facilities.

Midcaps & SMEs Join the Rally

Apart from PSUs, midcap and SME-listed players such as Paras Defence, Data Patterns, Taneja Aerospace, and DCX Systems also surged between 15% to 33% in May, buoyed by improving margins, large pending orders, and export tailwinds.

Emerging Names to Watch:

• Astra Microwave: Solid pipeline in radar systems

• Taneja Aerospace: Gaining traction in military aviation

• DCX Systems: Key supplier of wiring harnesses for aerospace

Institutional Inflows and FII Interest

Foreign institutional investors (FIIs), who traditionally preferred large-cap tech and finance names, have started increasing exposure to Indian defence stocks. Data from NSDL shows FII inflows of over ₹3,500 crore into defence and aerospace-related stocks in May alone.

Domestic mutual funds also ramped up allocations to BEL, HAL, and Mazagon Dock through thematic infrastructure and manufacturing schemes.

Technical and Valuation Outlook

While many defence stocks are trading near or above historical highs, analysts remain constructive given strong earnings visibility and supportive policy tailwinds.

Brokerage Views:

• Kotak Institutional Equities: “Defence remains one of the few sectors with multi-year order visibility, cash-rich balance sheets, and favorable government support.”

• Motilal Oswal: “HAL and BEL are our top picks. Midcaps like Zen Tech and Apollo Micro can offer alpha with higher volatility.”

Risks to Watch

Despite the bullish outlook, investors should remain mindful of key risks:

• Execution delays in large-scale government contracts

• Margin pressure from rising input costs or forex volatility

• Political risk and policy changes post-2024 general elections

• Supply chain disruptions in advanced components

Outlook: June and Beyond

With the Ministry of Defence expected to finalize multiple RFPs for:

• Multi-role fighter jets

• Unmanned aerial vehicles (UAVs)

• Submarine modernization

• Integrated surveillance systems

…analysts believe the rally may sustain through the second half of 2025, especially with fresh orders translating into top-line and bottom-line growth in FY26.

May 2025 was a defining month for India’s defence sector stocks. The surge in share prices of players like Apollo Micro, Zen Technologies, and Garden Reach signals renewed investor confidence in the sector's long-term prospects. With policy backing, global demand, and a robust pipeline of government contracts, defence continues to be one of the most promising themes on Dalal Street.

For investors, the sector offers a rare blend of growth, visibility, and strategic relevance in an increasingly uncertain geopolitical world.