Mazagon Dock, GRSE, Bharat Dynamics Rise Up to 5% As Iran-Israel Crisis Intensifies

Shares of Garden Reach Shipbuilders and Engineers (GRSE), Mazagon Dock and Bharat Dynamics bucked the broader market weakness and surged up to 5% on June 17 as the deepening Israel-Iran conflict put focus back on the defence sector.

Even though there isn’t a direct impact of the conflict in Middle East on the order books of these defence companies, many analysts see it as a sentiment booster for the sector. Defence stocks have been in the spotlight recently, buoyed by expectations of increased order inflows following India’s targeted strikes against terrorist outfits in Pakistan under the codename ‘Operation Sindoor’ in May.

While tensions between India and Pakistan have since eased, the ongoing conflict between Russia and Ukraine has continued to lend support to the sector’s rally. Adding to the momentum, the recent flare-up between Israel and Iran has further fuelled investor interest. That said, analysts remain divided on the outlook as some see continued upside while, others have flagged words of caution, pointing to a déjà vu of stretched valuations across many defence counters.

At 02:35 pm, Mazagon Dock shares were trading at ₹3,289, up by nearly 4% on the National Stock Exchange. GRSE shares surged over 2.93%, trading at ₹3,158. Shares of Bharat Dynamics and Cochin Shipyard rose by 0.72% and 0.32, respectively. This uptrend came despite benchmark indices, Sensex and Nifty, trading in the red territory.

"Indian government is likely to enhance defence spending from the current 2% of GDP to 3–4% over the next decade. Further, the government has targeted ₹25,000 crore in defence exports by 2025–26," said Sankhanath Bandyopadhyay, economist at Infomerics Valuation and Ratings Ltd.

"Investors can focus on export-driven defence stocks with long-term potential. In the current scenario, geopolitical tensions will likely be lingering between different countries, especially as being reflected in rising tensions in the Middle East," Bandyopadhyay said.