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Defence stocks rally to new highs with Mcap surging 50% since February. Nifty India Defence Index gains as investor confidence strengthens
BRAHMOS and other mechanised columns rolling down the Rajpath during a Republic Day Parade in New Delhi. (PTI Photo)
Defence Stocks Rally: India’s defence sector is on a strong offensive as a continued rally in defence stocks pushes the combined market capitalisation of 18 listed defence companies to an all-time high of Rs 11.23 lakh crore. This reflects rising investor confidence and renewed interest in the sector. The latest valuation marks a significant leap from the previous peak of Rs 10.09 lakh crore recorded in July 2024 and represents a sharp 50% surge from the February 2025 low of Rs 6.95 lakh crore.
Nifty Defence Index Fires on All Cylinders
The Nifty India Defence Index has been on a consistent upward trajectory. After registering a steep correction of 33% between July 2024 and February 2025, the index has bounced back strongly, climbing 9% so far in May following gains of 11.5% in April and 24.6% in March. Since hitting its low in February, the index has recovered over 50%, demonstrating strong momentum in the defence space.
Despite this broad recovery, only six of the 18 listed stocks have surpassed their previous record highs. The remaining counters continue to trade below peak levels. However, some stocks have emerged as clear outperformers. Ten companies that hit 52-week lows during March and April have since staged powerful rallies, with returns ranging from 55% to 112%. These include DCX Systems, MTAR Technologies, Dynamatic Technologies, Cyient DLM, Unimech Aerospace and Manufacturing, Data Patterns, Mishra Dhatu Nigam, Astra Microwave Products, Hindustan Aeronautics (HAL), and BEML.
Additionally, eight other defence stocks that touched 52-week lows earlier in 2024 have seen remarkable recoveries, delivering gains between 58% and 200%. Among these are Cochin Shipyard, Bharat Dynamics, Mazagon Dock Shipbuilders, Zen Technologies, Bharat Electronics, Solar Industries India, Paras Defence and Space Technologies, and Garden Reach Shipbuilders.
Geopolitical Tensions And Policy Support Fuel the Rally
The uptrend has been supported by a mix of geopolitical developments and strong policy signals. Rising tensions between India and Pakistan earlier this year set the stage for increased market interest. The rally was further fueled by Prime Minister Narendra Modi’s reaffirmation of support for indigenous defence manufacturing under the government’s flagship ‘Make in India’ and Atmanirbhar Bharat programmes. His call for boosting modern warfare capabilities and expanding India’s defence production base has raised expectations of continued capital and policy support.
Investor sentiment also got a lift from reports that more than a dozen countries have shown interest in purchasing the BrahMos missile system, following its effective demonstration during Operation Sindoor, which highlighted India’s growing capabilities in defence technology.
Mutual Funds Reload On Defence Holdings
Mutual funds have increased their exposure to the sector, adding to the momentum. In April, fund managers raised their holdings in 11 of the 18 listed companies. HAL led the inflows with Rs 505 crore, bringing the total MF stake in the company to Rs 13,480 crore. Solar Industries India saw Rs 119 crore in inflows, taking its MF holding to Rs 15,510 crore, while Mazagon Dock Shipbuilders attracted Rs 78 crore, pushing MF exposure to Rs 1,727 crore.
Other stocks that saw positive MF inflows include Zen Technologies, BEML, Data Patterns, Garden Reach Shipbuilders, Mishra Dhatu Nigam, and Dynamatic Technologies, with investments ranging between Rs 2 crore and Rs 60 crore. On the flip side, Bharat Electronics experienced the largest outflows, with mutual funds trimming stakes by Rs 893 crore, reducing total holdings to Rs 33,619 crore. Smaller outflows were also recorded in Cochin Shipyard, Astra Microwave Products, Unimech Aerospace, and MTAR Technologies.
Defence: A Tactical and Structural Investment Opportunity
Experts remain bullish on the sector’s prospects. Sandeep Bagla of Trust Mutual Fund said rising geopolitical risks are likely to drive sustained increases in defence spending, positioning the sector as a compelling multi-year investment opportunity. Anil Rego of Right Horizons PMS described the defence space as both a tactical and structural play, driven in the near term by higher defence budgets and procurement momentum, and supported in the long term by consistent government investment, a growing export pipeline, and reforms aimed at innovation and self-reliance.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
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