Defence stocks plummet after budget allocation falls short of expectations

Mishra Dhatu Nigam (down 9.15%), Paras Defence and Space Technologies (down 7.10%), Apollo Micro Systems (down 5.43%), Data Patterns (India) (down 4.46%) Hindustan Aeronautics (down 4.21%), Bharat Dynamics (down 3.77%) and Bharat Electronics (down 3.76%) slumped.

The Union Budget 2025-26 allocated Rs 6,81,210.27 crore to the Ministry of Defence (MoD). While this represents a 9.53% increase from the Budgetary Estimate of FY 2024-25 and constitutes 13.45% of the total Union Budget (the highest allocation among ministries), it appears to have fallen short of market projections.

Of the total allocation, Rs 1,80,000 crore (26.43%) is earmarked for capital outlay on defence services, a 4.65% increase from the Budgetary Estimate of FY 2024-25. Within this, Rs 1,48,722.80 crore is designated for capital acquisition (the modernization budget), while the remaining Rs 31,277.20 crore will fund research & development and infrastructure development.

The revenue expenditure for the armed forces is Rs 3,11,732.30 crore (45.76% of the total allocation). Defence pensions account for Rs 1,60,795 crore (23.60%), and civil organizations under the MoD receive Rs 28,682.97 crore (4.21%).