India and the European Union deepened their strategic ties with the signing of a landmark Security and Defence Partnership (SDP) on Tuesday, 27 January 2026. This agreement, announced by Kaja Kallas, Vice President of the European Commission, comes amid a high-level summit co-chaired by European Council President Antonio Luis Santos da Costa and European Commission President Ursula von der Leyen.

The dignitaries arrived in India as chief guests for the 77th Republic Day celebrations on 26 January. In a notable gesture, personnel from the EU's naval operations Atalanta and Aspides participated in the parade for the first time, symbolising the growing bond between the two sides.

Kallas highlighted the strong momentum in EU-India relations during her remarks on Monday. She stated that the SDP would deliver tangible outcomes in critical areas including maritime security, cybersecurity, and counterterrorism, marking a significant step forward in bilateral cooperation.

The SDP aims to enhance interoperability in the defence domain. It will open opportunities for Indian firms to engage with the EU's SAFE programme, a €150 billion financial instrument designed to bolster defence readiness among member states.

According to a PTI report, the partnership will foster deeper defence and security collaboration. This includes avenues for joint initiatives that could strengthen supply chains and technological exchanges between India and Europe.

In parallel, India and the EU are launching negotiations for a Security of Information Agreement (SOIA). This pact is anticipated to further industrial defence cooperation, facilitating secure sharing of sensitive data and technologies.

The developments have thrust defence stocks into the spotlight. Shares of key Indian companies such as Bharat Dynamics, Bharat Electronics Limited (BEL), Garden Reach Shipbuilders & Engineers (GRSE), and Hindustan Aeronautics Limited (HAL) are expected to see heightened investor interest on 27 January.

These firms stand to benefit from expanded export opportunities and collaborative projects under the SDP. For instance, HAL and BEL, with their expertise in aircraft and electronics, could tap into EU programs, while GRSE's shipbuilding prowess aligns with maritime security goals.

Bharat Dynamics, a leader in missile systems, may find new avenues in joint defence manufacturing. The agreement's focus on interoperability could accelerate indigenous production while integrating with European standards.

Adding to the positive sentiment, Commerce Secretary Rajesh Agrawal announced on Monday that official-level negotiations for an India-EU Free Trade Agreement (FTA) have concluded successfully. The announcement is slated for the summit on 27 January.

Agrawal described the FTA as balanced and forward-looking from India's perspective. It promises to boost two-way commerce, enhance economic integration, and drive investments across both economies.

Legal scrubbing of the FTA text is currently underway. The pact, finalised after 18 years of talks that began in 2007, is expected to be signed later this year, with implementation potentially starting early next year pending approvals.

In India, the FTA requires only Union Cabinet approval. In the EU, it needs parliamentary ratification, which could extend the timeline but underscores the deal's comprehensive scope.

This dual progress on defence and trade fronts signals a maturing India-EU relationship. It positions India as a key partner in Europe's security architecture, amid global geopolitical shifts.

For defence firms, the SDP could mean access to EU funding and markets, catalysing growth in sectors like aerospace and naval systems. Investors are watching closely as these stocks react to the summit's outcomes.

The timing aligns with India's push for indigenous manufacturing under initiatives like Make in India. Collaborations with EU entities could enhance technology transfer, bolstering self-reliance while expanding global footprints.

The 16th India-EU Summit represents a pivotal moment. It not only fortifies security ties but also lays the groundwork for economic prosperity, benefiting stakeholders across both regions.