Germany and India want to expand their cooperation in the armaments sector. What investors should know about it and how the defense stocks are performing.
A corresponding declaration of intent by the defense ministries was signed during Chancellor Friedrich Merz’s visit to India in Ahmedabad.
TKMS is supposed to build submarines in India
Contracts for specific projects were not initially concluded. However, India wants to build six submarines worth eight billion euros in Mumbai in cooperation with the German company thyssenkrupp Marine Systems (TKMS). The signing of an agreement on this is expected shortly and could open the door to further collaborations.
According to the latest statistics from the peace research institute Sipri, India is the world’s largest arms importer. Between 2019 and 2023, the country still purchased 36 percent of its defense equipment from Russia – even if the trend is downward. German arms exports to India could also reduce dependence on Russia.
A total of 27 agreements
A total of 27 declarations of intent and announcements were signed on the sidelines of the talks between Merz and Indian Prime Minister Narendra Modi – from cooperation in mining rare earth to promoting young hockey players in both countries to recruiting specialists for the German health system.
The recruitment of skilled workers from India has already been pushed forward by previous governments. According to the Federal Labor Office, the number of Indians in Germany who are subject to social security contributions rose from almost 25,000 to almost 170,000 between 2015 and 2025. And with almost 60,000, the largest group of foreign students comes from India.
India announces roadmap for arms cooperation with Germany
India’s Prime Minister Narendra Modi has announced a joint development plan for future cooperation with Germany in the defense sector. Modi said during his visit to India that he was grateful to Federal Chancellor Friedrich Merz for simplifying the regulations in the area of arms trade. “We will develop a roadmap to increase cooperation between our defense sectors.” Both sides would seek appropriate opportunities for joint development and production.
The Chancellor had previously signed a memorandum of understanding between the defense ministries of both countries in Ahmedabad in the western Indian state of Gujarat, which provides for the expansion of cooperation in this area. Contracts for specific projects were not initially concluded. However, India wants to build six submarines worth eight billion euros in Mumbai in cooperation with the German company thyssenkrupp Marine Systems (TKMS). The signing of an agreement on this is expected shortly and could open the door to further collaborations.
Modi emphasized that Chancellor Merz’s visit gave new impetus to the relations between the two countries and brought trust. The Chancellor’s first trip to Asia is “strong evidence of the importance he attaches to relations with India.” Merz will be accompanied on his two-day trip by a large business delegation.
Merz hopes for a free trade agreement with India soon
Chancellor Friedrich Merz (CDU) hopes that the free trade agreement between the EU and India can be signed at a summit on January 27th. This agreement is urgently needed in order to exploit the full potential of economic relations between Germany and India, he said after a conversation with Indian Prime Minister Narendra Modi in Ahmedabad. “We cannot and do not want to let this opportunity go to waste.”
EU Commission President Ursula von der Leyen and Council President António Costa want to travel to the Indian capital New Delhi at the end of January and, if possible, sign the agreement there. Those around the Chancellor described the chances of success as good.
Mercosur agreement “an encouraging sign”
Merz described it as an “encouraging sign” that an agreement on the agreement with the Latin American Mercosur states was only reached last week after more than a quarter of a century of negotiations. Negotiations on the EU-India agreement began 18 years ago.
Rheinmetall delivers Lynx infantry fighting vehicle to Ukraine
Germany’s largest arms company Rheinmetall is delivering five Lynx KF41 armored personnel carriers to Ukraine. The first vehicles are scheduled to be delivered at the beginning of 2026, as the company announced in Düsseldorf. The order value for the five vehicles amounts to a mid-double-digit million euro amount. The systems would be financed by the Federal Republic of Germany. “The next step is to procure additional lots, including production in Ukraine,” it said.
Ukraine has been defending itself against a Russian war of aggression for almost four years and is also supported with arms deliveries from Germany, other European countries and the USA.
TKMS rises to the top of the MDAX
TKMS shares benefited on Monday from the continued prospect of an order from India. With a price increase, they take the lead in the MDAX of medium-sized stocks. This means that the recent upward trend continues: In the still young year, the increase is already almost a third. The TKMS shares ultimately rose by 12.42 percent to 92.75 euros via XETRA. However, Rheinmetall’s shares were 0.53 percent lower at 1,890.00 euros. HENSOLDT ultimately rose by 0.77 percent to 92.00 euros, while RENK stocks rose by 3.18 percent to 66.22 euros.
The ongoing arms fantasy drove DEUTZ shares to their highest level since mid-2007 on Monday. Ultimately, they gained 5.56 percent to 10.53 euros via XETRA, making them the strongest stock in the SDAX small cap index. The price increase in this young year is already almost a quarter. In the past year, the securities had already more than doubled in value.
Deutz is currently moving away from being a pure engine manufacturer and is also looking for an opportunity in the armaments sector. CEO Sebastian Schulte recently confirmed the company’s transformation in an interview with the “Frankfurter Allgemeine Zeitung”. Accordingly, the takeover of the Lower Saxony company Frerk, announced in mid-December, could also pay off in the arms business in the future. On top of that, Deutz focuses on business related to data centers.
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AHMEDABAD (dpa-AFX)
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