India’s defense industry is experiencing significant growth, bolstered by rising national security concerns and the government’s Aatmanirbhar Bharat initiative, which promotes domestic manufacturing and exports. Notably, defense exports have skyrocketed over 34 times since 2014, reaching $2.76 billion in FY25, with private sector contributions of approximately $1.80 billion. Small-cap stocks such as Krishna Defence & Allied Industries and CFF Fluid Control have reported impressive profit growth, outpacing industry averages, with Krishna’s net profits surging by 96% and CFF’s by 77% in recent years. As these companies capitalize on strong order books and the push for indigenization, their performance reflects India’s strategic pivot towards self-reliance in defense manufacturing, presenting both opportunities and challenges for investors in the SME sector.