Defence stocks tumbled in trade today, buoyed by several factors. The sharp fall in the share prices pushed the Nifty India Defence index down nearly 1.4 percent to hover around 8,739 in the morning.
After a significant rally, defence stocks have seen significant volatility recently. While geopolitical tensions around the globe fuel the sentiment, analysts flag elevated valuations and lack of fresh triggers.
Motilal Oswal gives 'Neutral' rating to BDL shares
Bharat Dynamics (BDL) shares were the top loser on the index, dropping over 3 percent to trade at Rs 1,917 apiece. This comes after Motilal Oswal Financial Services initiated coverage on the stock with a 'Neutral' rating and a target price of Rs 1,900 apiece. This implies a downside potential of more than 4 percent from the stock's previous closing price of Rs 1,985 apiece.
"We like the business model of BDL and its ability to scale up its revenues and order book in current scenario, however, with fair valuations, we would look for lower price points to enter the stock," the brokerage said. It expects the firm's revenue growth to rebound and benefit from emergency procurement pipeline.
Garden Reach Shipbuilders & Engineers (GRSE) shares followed, dropping over 3 percent to trade at Rs 2,890 apiece. While the stock has dropped nearly 11 percent in the past one month, it has rallied over 96 percent in the past six months.
Data Patterns and Zen Technologies shares plunged over 2 percent each, while Solar Industries, Hindustan Aeronautics (HAL) and Cochin Shipyard shares declined over 2 percent each. Mazagon Dock Shipbuilders, Bharat Electronics (BEL) and Paras Defence shares were down over 0.6 percent, while those of BEML were trading in the red with marginal losses.
Concerns over elevated valuations
The defence stocks have been in focus on hopes of higher order inflows, after the Indian military conducted targeted strikes against terrorist outfits in Pakistan under the codename 'Operation Sindoor' in May. As the geopolitical tensions between India and Pakistan eased, the escalations in Russia-Ukraine war continued to support the rally in defence stocks. The rise in tensions between Israel and Iran further boosted the stocks. However, analysts have mixed views regarding the space, with some flagging elevated valuations in these stocks.
Easing geopolitical tensions
The fall in the defence stocks also comes on the back of overall easing geopolitical tensions. US President Donald Trump had hinted at a possible Gaza ceasefire deal between Israel and Hamas this week. This comes amid Israeli Prime Minister Benjamin Netanyahu’s visit to US. Earlier, the easing tensions between Iran and Israel after significant escalations in the oil-rich middle east, had pushed down the stocks.
Profit booking after record rally
Defence stocks may have also dropped as investors booked profits at elevated levels. The stocks have seen significant surge in 2025 so far. BDL shares have gained over 69 percent this year, while those of jumped 75 percent. HAL shares are up 19 percent while Mazagon Dock Shipbuilders shares are up nearly 46 percent.
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