ideaforge to Cochin Shipyard to GRSE: Defence stocks surge up to 45% post Operation Sindoor; will this rally continue or hit a roadblock?

The Indian share market recorded strong rally last week, as major benchmark indices BSE Sensex and NSE Nifty surged up to 4% amid broad-based rally across indices. On the sectoral front, all

major indices closed in the green zone, while defense index emerged as top performer rising 17% in six consecutive sessions amid heightened investor interest in the backdrop of escalated

geopolitical tensions between India and Pakistan after ‘Operation Sindoor’ on May 8.

The market capitalisation of 18 Indian defence companies listed on the Nifty India Defence Index reached an all-time high of ₹11.23 lakh crore, driven by strong investor confidence, rising

geopolitical tensions, and government support for indigenous defence manufacturing.

The Nifty India Defence Index has surged over 50% since February 2025, recovering from a previous 33% correction, with a 9% gain in May alone, said Siddharth Bhamre, Head of Research, Asit

C. Mehta Investment Intermediates.

He pointed out that despite the broader rally, only six stocks have surpassed their previous highs, while others remain below peak levels. “Select companies like DCX Systems, MTAR

Technologies, and Hindustan Aeronautics have seen sharp rebounds of 55–112%. Mutual funds have increased exposure to 11 firms, led by Hindustan Aeronautics and Solar Industries India, though

Bharat Electronics saw the largest outflow.”

“The sector is seen as a promising long-term opportunity, backed by rising defence budgets, growing export interest, and sustained policy focus under the Make in India and Atmanirbhar Bharat

initiatives,” Bhamre said.

An important trend in the market is the sharp rally in defence stocks. Even though this segment has bright medium- to long-term prospects, their valuations have become excessive and,

therefore, investors have to be extremely cautious, said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

“Some profit booking in this segment would be appropriate," he added.

Based on the current market dynamics, the Nifty Defence Index has significantly outperformed the broader Nifty, indicating strong market sentiment towards the defence sector, said Sunny

Agrawal, DVP & Head of Fundamental Research at SBI Securities.

“This outperformance is likely driven by increased government focus on indigenisation, higher defence budgets, and rising global defence demand, as seen in the recent success of 'Made in

India' defence systems,” he said.

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