New Delhi, June 24 -- The recent escalation of geopolitical tensions in the Middle East amid the Israel-Iran war, and the India-Pakistan conflict last month has renewed investors' focus on defence stocks. India's defence sector growth over the past decade has been driven primarily by government budgets and policies that promote domestic production.

The Ministry of Defence's budget has roughly doubled, from Rs.2.7 lakh crore in 2015-16 to Rs.6.8 lakh crore in 2025-26, the highest among all ministries, accounting for 13% of the central government's total expenditure. Defence exports rose by 13x since FY16, private sector exports rose by 67x and domestic procurement share surged to 75%, with large headroom for growth.

Analysts believe that...