Indian defence stocks surged on June 17 as the conflict between Israel and Iran intensified, fuelling expectations of increased global and domestic defence spending. The Nifty Defence Index climbed over 1.3% to hover around 8,982, with major gainers including Mazagon Dock Shipbuilders, Data Patterns, and Bharat Dynamics.
This latest upmove extends a period of heightened investor interest in the defence sector, sparked initially by India’s ‘Operation Sindoor’—a targeted military operation against terror outfits in Pakistan in May. Since then, a series of global flashpoints, including the ongoing Russia-Ukraine war and now the Iran-Israel standoff, have kept defence-related stocks in the spotlight.
What’s Driving the Surge in Defence Stocks?
Several factors are converging to drive momentum in the sector:
- Increased geopolitical tensions globally, particularly in the Middle East.
- Post-Operation Sindoor optimism, which boosted domestic defence sentiment.
- Anticipated rise in defence allocations by the Indian government.
- Strong export pipeline targets and indigenous manufacturing push.
“Defence stocks have seen strong swings—from sharp rallies post-Operation Sindoor to intermittent profit booking, and now a rebound amid Middle East unrest,” said Ajit Mishra, SVP, Research at Religare Broking. “The sector is benefiting from a combination of short-term catalysts and long-term structural drivers, including India’s push for self-reliance in defence and rising global demand.”
However, Mishra also cautioned that sharp price gains have led to valuation concerns, warning of potential near-term volatility. He advised investors to focus on companies with solid order books, strong execution capabilities, and healthy financials.
Expert Outlook: Long-Term Potential vs Short-Term Risks
Sankhanath Bandyopadhyay, Economist at Infomerics Valuation and Ratings, expects India’s defence spending to rise from around 2% of GDP to 3–4% over the next decade. He noted, “With a target of ₹25,000 crore in defence exports by FY26, there is considerable potential in export-oriented companies. However, investors must evaluate fundamentals and mix growth with dividend yield when investing.”
Robin Arya, founder of GoalFi, echoed a similar sentiment, saying, “Even after the sharp re-rating, we remain selectively bullish. The Nifty Defence Index rallied 18% in May alone, adding ₹1.8 lakh crore in market cap. This isn’t just speculative—it’s backed by a ₹16 lakh crore procurement pipeline and a ₹3 lakh crore export target by 2029.”
Top Gainers in the Defence Space
- Mazagon Dock Shipbuilders: Jumped nearly 5% to ₹3,322, snapping a four-day losing streak.
- Data Patterns: Rose over 2.5% to ₹3,035.
- GRSE & Bharat Dynamics (BDL): Gained more than 2% each.
- Cochin Shipyard: Up by 1.7%.
- DCX India, Paras Defence, BEML: Gained over 1% each.
- HAL, BEL, Solar Industries, Cyient DLM, Astra Microwave: Posted marginal gains.
However, Zen Technologies and a few others bucked the trend, closing in the red.
Middle East Escalation Adds Fuel to the Fire
Tensions between Iran and Israel have continued to escalate, with both sides reportedly exchanging missile strikes and significant casualties being reported. In a controversial series of posts, former U.S. President Donald Trump warned of potential American involvement and urged civilians to evacuate Tehran.
“Iran should have signed the deal. Simply stated, IRAN CAN NOT HAVE A NUCLEAR WEAPON,” Trump wrote on Truth Social, hinting at possible U.S. military action. He also denied claims from French President Emmanuel Macron about efforts toward a ceasefire, calling them “publicity seeking.”
The geopolitical uncertainty has not only rattled global markets but also added to the case for rising defence demand worldwide.
Bottom Line: Structural Strength Meets Tactical Momentum
While defence stocks remain volatile and potentially overvalued in the near term, analysts agree on the sector’s long-term strength. Between a ramp-up in domestic manufacturing, a growing export opportunity, and an increasingly uncertain global landscape, India’s defence sector continues to attract investor interest.
Key takeaway? Stay selective, focus on fundamentals, and think long-term.
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