From Red to Rally: Defence Stocks Rise Amid Heightened India-Pak Tensions

Nobody can predict with certainty how the market will react to any event. Defence stocks, which were expected to ride on the military development that took place on Wednesday, actually ended the session in red yesterday, but today these stocks have been outperforming the headline indices.

Currently, the Nifty India Defence index was up 1%, with almost all the stocks in green. Bharat Dynamics, Cochin Shipyard, Mazagon Dock and Garden Reach Shipbuilders were up 1.5-2%. Data Patterns and MTAR Technologies were the top gainers in the thematic index and were up over 3%.

The stocks in the sector has come into focus after the Indian Armed Forces struck nine-terrorist linked locations in Pakistan and Pakistan occupied Kashmir on Wednesday. The thematic index has gained 3% since the Phalagam Attack, whereas the headline Nifty 50 index has risen just 1% in the period.

This crossborder tensions between the nuclear-armed neighbours are expected to boost earnings for the domestic defence companies as these companies are expected to peddle up their execution speed. Also, the escalating tensions will also increase the focus on building on robust digital infrastructure with heightened focus on cyber-security. Further, strong and resilient export outlook also strengthens the sector’s prospects

On Wednesday, defence stocks tumbled sharply as the investors looked to book profit and take a cautious stance amid rising geo-political tensions for India. These stocks have already witnessed a strong rally in the recent sessions.

The Indian Armed Forces launched ‘Operation Sindoor’ in response to the April 22 terrorist attack that struck Phalgam killing 25 Indian and one Nepali citizen. “Our actions have been focused, measured and non-escalatory in nature,” the Ministry of Defence had said in a press release. “India has demonstrated considerable restraint in selection of targets and method of execution.”

Select stocks have been hovering higher in the recent days following the incident, with Solar Industries and Mazagon Dock touching their 52-week high levels during this period. The former stock reached its 52-week high on April 29, whereas the latter touched the level on May 2.

Recently, a formal announcement of the conclusion of Rs 64,000-crore deal with France for 26 Rafale-M fighter jets also pushed the defence stocks under radar of market participants. Deliveries are set to begin from mid-2028 and likely to be completed by 2030.

“The deal includes training, simulator, associated equipment, weapons and Performance-Based Logistics. It also includes additional equipment for the existing Rafale fleet of the Indian Air Force,” a Defence Ministry statement had said. “The delivery of these aircraft would be completed by 2030, with the crew undergoing training in France and India.”