Shares of leading domestic defence equipment suppliers surged on March 21 after the Centre's Defence Acquisition Council (DAC) approved eight capital acquisition proposals worth over Rs 54,000 crore.

The rally in the shares pushed the Nifty India Defence index up over a percent to around 6,245 in early trade, extending gains for the seventh session in a row.

Apollo Micro Systems, which develops the early air warning system - AEW&C - saw its share price surge nearly 4 percent, and Bharat Dynamics (BDL) shares surged over 3 percent, riding on the hope that the company may be one of the key beneficiaries in latest approvals to procure Varunastra Torpedoes.

DCX Systems shares were the top gainers on the index, jumping over 6 percent to trade at Rs 254 apiece. ideaForge shares meanwhile surged over 4 percent to trade at Rs 399 apiece. Zen Technologies shares also saw a strong rise, increasing over 3 percent to trade at Rs 1,333 apiece.

Hindustan Aeronautics (HAL) and Paras Defence shares were each tradings nearly 2 per cent higher at Rs 3,897 apiece and Rs 1,010 apiece respectively. Bharat Electronics shares were trading in the green with marginal gains at Rs 298 per share.

The Ministry of Defence announced on March 20 that the DAC has accorded the Acceptance of Necessity (AoNs) to eight proposals. The proposals include the plan to procure 1,350 HP engines to upgrade the present 1,000 HP Engine for the Indian Army's T-90 tanks. "This will enhance the battlefield mobility of these tanks especially in high-altitude areas by increasing the power-to-weight ratio," the ministry said.

The proposals also include the procurement of Varunastra Torpedoes (Combat), an indigenously developed ship-launched anti-submarine torpedo, for the Indian Navy. The further addition of the torpedos which are developed by Naval Science & Technological Laboratory, will "enhance the Navy's capability against adversaries' submarine threats", the ministry said.

For the Indian Air Force, the DAC cleared the proposal for the procurement of Airborne Early Warning & Control (AEW&C) Aircraft Systems. "AEW&C systems are capability enhancers which can change the complete spectrum of warfare and exponentially increase the combat potential of every other weapon system," the ministry further said in its statement.

DAC also approved the norms to make the capital acquisition process faster, more effective and more efficient. The government highlighted that 2025 is being celebrated as the 'Year of Reforms’ in the Ministry of Defence.

ICICI Securities issued bullish calls for the stock after the announcement by the government. "In our view, BEL is likely to benefit from the rub-off effect on the companies in the radar ecosystem, such as Astra Microwave. Thus far in FY25, AoNs (cumulative) worth INR 2.5trn have been issued, still lower than FY24 (INR 3.53trn) and FY23 (INR 2.6trn)," the brokerage said in its latest note.

ICIC Securities kept a 'Buy' rating for the shares of BDL, BEL and Astra Microwave. For the shares of BDL, it kept a target price of Rs 1,400 apiece, implying an upside potential of over 12 percent from the stock's previous closing price. For BEL and Astra Microwave, the brokerage kept a target price of Rs 350 apiece and Rs 935 apiece, implying an upside potential of 18 percent and 36 percent respectively.