Indian defence stocks are launched into financial orbit, by continuing their relentless upward trajectory. The sector's stellar performance has propelled the combined market capitalisation of 18 listed defense companies to an unprecedented Rs 11.23 lakh crore—shattering the previous record of Rs 10.09 lakh crore set in July last year.
This marks a nearly a 50% increase from February's low of Rs 6.95 lakh crore, illustrating the sector's remarkable resilience and investor confidence in India's defence sector. The recent rally is primarily due to two factors—escalating geopolitical tensions between Indian and Pakistan and the Prime Minister's reinforced commitment to indigenous defense manufacturing. These factors have driven investors’ sentiments despite concerns about overvaluation.
The Nifty India Defence index has delivered eye-watering returns of over 25% in just the past month and more than 27% since the beginning of 2025. Even the mutual fund houses have increased their exposure in 11 of the 18 listed defence stocks, led by Hindustan Aeronautics and Solar Industries India, Siddharth Bhamre, head of research at Asit C Mehta Investment Intermediates, said in a note. However, Bharat Electronics has seen the largest outflow.
"Despite the broad rally, only six stocks have surpassed their previous highs, while others remain below peak levels," Bhamre said.
The recent rally has once again pushed valuations well above the historical average, setting a high bar for earnings growth for these companies. BEL and Data Patterns, for instance, are currently trading at a price-to-earnings multiple of over 53 and 72, respectively.
Warning Flares: Experts Signal Caution Amid Soaring Valuations
The sector is seen as a promising long-term opportunity on the back of rising defence budgets, growing export interest, and sustained policy focus, Bhamre said. However, as these stocks continue their skyward journey, market observers are beginning to wave caution flags. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said, "The stocks in the defense segment now have very high valuations, though the segment has bright medium to long-term prospects.”
VIjayakumar has advised the investors to be extremely cautious. “Some profit booking in this segment would be appropriate,” he added.
Individual Stocks Breaking Records
Despite the warnings, several defence stocks continue to defy gravity with extraordinary performance metrics.
Shares of Data Patterns traded over 2% higher today, making them among the top gainers in the Nifty India Defence index. The company's quarterly results provided ample fuel for this surge—a 60% on-year growth in net profit for the March quarter and revenue that more than doubled during the period.
Data Patterns said it secured Rs 355 crore of orders during FY25 and its orderbook was of Rs 729.84 crore as of March 31, 2025. It has received Rs 40.21 crore worth of orders received during in the June quarter so far, the company said. “Looking ahead, we are optimistic about robust order inflows and remain confident in our ability to sustain this growth trajectory,” Srinivasagopalan Rangarajan, chairman and managing director of the company, said.
With a jaw-dropping 157% profit jump in Q4, Zen Technologies was locked in the 5% upper circuit, becoming one of the star performers in the thematic index. Its revenue for the quarter also doubled on year, helping surpass the FY25 revenue guidance. “…we are planning an expansion of our existing R&D centre with an investment of close to Rs 70 crore, to further accelerate product development and create new opportunities for long-term growth,” Ashok Atluri, chairman and managing director of Zen Tech, said.
Zen Tech's anti-drone systems were used in 'Operation Sindoor', CNBC-TV18 quoted Atluri as saying. The company has also been engaging with the government for future orders and it expects the orderbook to be substantially higher than Rs 800 crore this year, Atluri said.
The company expects to execute an order Integrated Air Defence Combat Simulators for the L70 gun during the ongoing financial year. It received this order from the Ministry of Defence in the March quarter.
Meanwhile, Shares of Paras Defence touched new life-time high today, surpassing the previous high level which they touched on Friday. However, the stock has reversed its gains was currently trading nearly 4% lower on the bourses.
As the sector is likely approaching an inflection point, the question remains that whether investors will heed the calls for profit-taking, or the rally will extend further?
