Even with strong tailwinds, the defence pack saw a reality check as stretched price levels, coupled with bulk deal activity by promoters, drove a broad sell-off in the sector
A blanket of profit booking covered the defence pack on May 20 as investors rushed to book partial gains off of the recent bull run seen across the sector. Prominent names like Cochin Shipyard, Paras Defence, Bharat Dynamics, Hindustan Aeronautics, and Garden Reach Shipbuilders, drowned in the sea of red, trading with cuts of up to 6%.
Cochin Shipyard was the worst hit within the pack, dropping 6%, while other major names including Paras Defence, Bharat Dynamics, Hindustan Aeronautics, and Bharat Electronics also saw losses ranging between 2–5%. DCX India, BEML, and Garden Reach Shipbuilders were down over 3% each, while Cyient DLM and Data Patterns slipped around 1%.
Paras Defence saw additional pressure as promoters offloaded 3.3% stake via bulk deals. NSE data showed promoter Sharad Virji Shah sold 9 lakh shares at ₹1,682.87 each, while Anish Mehta and Kaajal Harsh Bhansali sold 2.17 lakh shares each at slightly lower prices. The total sale of 13.34 lakh shares came after the stock surged nearly 55% over the past month. As of March 2025, promoters held a 57.05% stake in the company.
However, the profit booking in the sector was much anticipated by market participants as the recent rally had stretched valuations beyond fundamentals, bringing the debate over hot valuations back into the picture.
The recent spike in defence stocks, triggered by heightened border tensions and the consequent ‘Operation Sindoor,’ had pushed up prices for six consecutive sessions until May 16, adding over Rs 4.2 lakh crore in market capitalization of listed defence firms. The leap in those six sessions, took the sector’s m-cap to a total to Rs 11.23 lakh crore, reflecting a 50% jump from February’s lows.
While the sector remains structurally strong with tailwinds like rising defence budgets, increasing exports, and policy support, market experts are urging caution. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated that valuations in the segment have become stretched and suggested that partial profit booking remains a prudent move at current levels.