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Defence-related stocks witnessed a significant decline on May 20, marking their second straight session of losses; What should investors do?
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Defence Stocks Decline: Defence-related stocks witnessed a significant decline on May 20, marking their second straight session of losses. The pullback came as investors booked profits after a sharp rally driven by optimism surrounding fresh defence orders and the success of Operation Sindoor.
Shipyard and Defence Firm Stocks See Sharp Declines
Shares of Cochin Shipyard, ideaForge Technology, Garden Reach Shipbuilders & Engineers (GRSE), and other defence-linked firms fell sharply on Tuesday. Cochin Shipyard dropped as much as 6.9% to Rs 1,847.60 on the BSE, while ideaForge lost 6.1% to Rs 536.25. GRSE declined 5.1% to Rs 2,356.05, and Mazagon Dock Shipbuilders shed 3.1% to Rs 3,303.20.
These losses came on the heels of a weak session on Monday, when stocks like Cochin Shipyard, Mazagon Dock, GRSE, and Hindustan Aeronautics Ltd (HAL) had already retreated up to 4%.
Rally Loses Steam After Record Gains
Last week’s massive surge had been fuelled by investor enthusiasm for India’s expanding defence production and export prospects. Between May 9 and 17, Cochin Shipyard and GRSE jumped 41% and 40% respectively, while ideaForge soared 56%. HAL also rose 16% over the same period.
However, the current correction suggests that valuations may have run ahead of fundamentals, prompting traders to lock in gains.
Paras Defence Slumps After Promoter Stake Sale
Paras Defence & Space Technologies fell nearly 5% after its promoters offloaded a 3.3% stake in the company through bulk deals. This comes after the stock had rallied around 55% over the past month.
As per NSE data, promoter Sharad Virji Shah sold 9 lakh shares at Rs 1,682.87 apiece. Anish Mehta and Kaajal Harsh Bhansali each sold 2.17 lakh shares at Rs 1,664.62 and Rs 1,662.62, respectively. In total, the promoters sold 13.34 lakh shares.
Promoters held a 57.05% stake in the company as of March 2025, with the remaining 42.95% owned by public shareholders.
Operation Sindoor Sparked the Surge
The recent rally had been driven by the Indian military’s showcase of domestic missile and drone technology under “Operation Sindoor.” Between May 9 and 17, the sector added around ₹1.8 lakh crore in market capitalisation, on hopes of large upcoming defence contracts.
Antique Stock Broking said it expects significant orders in FY26–27, including six submarines under Project 75(I), three Kalvari-class submarines, P-17B frigates, next-gen corvettes, and smaller naval vessels.
Caution on Valuations, But Long-Term Outlook Positive
Despite the near-term volatility, analysts remain optimistic about the long-term prospects of the defence sector. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, cautioned investors about rich valuations, stating, “Even though the sector has strong medium-to-long-term potential, some profit booking is justified given the recent surge.”
Antique Stock Broking projects that the combined order books of Cochin Shipyard, GRSE, and Mazagon Dock could more than triple by FY27. The brokerage maintains a ‘buy’ rating on GRSE and Mazagon Dock, while assigning a ‘hold’ rating to Cochin Shipyard due to uncertainty around the timeline and scale of the proposed Indigenous Aircraft Carrier II (IAC-II) project.
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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