Cochin Shipyard, HAL, Mazagon Dock, other defence stocks fall up to 52% from their July 2024 peaks; should you buy, sell or hold?

Cochin Shipyard, HAL, Mazagon Dock fall up to 55% from their peaks; more pain lies ahead for defence stocks or is it time to accumulate?

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26 Aug, 2025 12:21

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The defence segment stocks in India are witnessing a sharp correction after delivering stellar returns over the past three years, with shares from the Nifty Defence Index falling up to 55 percent from their July 2024 peaks.

The NSE Defence Index itself has declined 29 percent from its all-time high, raising questions about whether the downturn signals more pain ahead or an opportunity to accumulate.

The sector, buoyed by the government’s focus on self-reliance under the Atmanirbhar Bharat initiative, had earlier seen multibagger returns, with stocks soaring up to 400 percent on import restrictions, increased foreign direct investment (FDI) and a push for defence exports. However, the recent profit booking has led to a sharp decline in market valuations.

Mazagon Dock Shipbuilders stock has seen the steepest fall by plunging 45 percent from its peak of Rs 5,860 on July 5, 2024. The company executed a 1:2 stock split in December 2024, where one existing share of Rs 10 face value was split into two shares of Rs 5 face value.

Shares of Cochin Shipyard, another prominent defence public sector undertaking (PSU), dropped 52.54 percent from its record high of Rs 2,979.45 on July 8, 2024, to the day's low of Rs 1,357.05.

Garden Reach Shipbuilders & Engineers Ltd: Down 51.80 percent from Rs 2,833.80 on July 5, 2024

Data Patterns (India) Ltd: Fell 43.78 percent from Rs 3,655 on the same date

Bharat Dynamics: Declined 38 percent

DCX Systems Limited: Down 24.73 percent

Bharat Electronics: Slipped 23.28 percent

Hindustan Aeronautics: Shares dropped 33.38 percent from its peak of Rs 5,674.75

Analysts' View

Despite the downturn, analysts at Antique Research see a buying opportunity in the recent correction. The brokerage highlighted that the Defence Acquisition Council (DAC) has approved Acceptance of Necessity (AoN) proposals worth Rs 4.4 lakh crore in 2024, up from Rs 3.5 lakh crore in 2023. Of this, 94 percent of the procurements are expected to be sourced domestically, boosting business prospects for Indian defence companies. AoN marks the formal start of the procurement process for defence equipment, signalling a robust pipeline for future orders.

The government’s continued emphasis on domestic defence production, coupled with increasing export orders, provides a long-term growth runway for the sector.

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What Lies Ahead?

Analysts believe the structural story of the Indian defence sector remains intact on the back of increased indigenisation and growing demand for weaponry in India and abroad due to persistent geo-political conflicts.

Manish Chowdhury, Head of Research, StoxBox noted that following the recent correction in defence sector stocks, investors can accumulate these stocks from a medium- to long-term perspective. The strong order book, improved execution capabilities, robust growth outlook and growing share of exports positions the sector to benefit going ahead, he said.

"There are near term tailwinds as we expect government spending in the defense sector to improve from hereon and will not be surprised to see a higher allocation for the sector in the upcoming Union Budget. We advise investors to accumulate quality stocks such as HAL, Mazagaon Dock, Cochin Shipyard and BEL as valuations have moderated and provide a good entry point from a 12-months perspective," he said.

India's defence sector has been nothing short of goldmine in last 3 years, but second half of 2024 took an unexpected turn with most defence stocks correcting by 50% from their highs, said Chowdhury.

Narender Singh, Smallcase Manager, Founder Growth Investing noted that post their high of July 2024, many among defence stocks had retraced to 50% from their highs, primarily because of stretched valuations and an moderate allocation in defence budget and a fairly long delivery time period.

Way forward for defence ector

India ranked as the fourth-largest military spender, allocating $84 billion in 2023, accounting for 2.4% of its GDP. Despite this, approximately 35% of India’s defence needs are still met through imports, presenting a significant opportunity for import substitution. FY2024-2025 budget, Defence allocation was up by 4.79 percent over previous Period, i.e. Rs 6.22 lakh crore.

Singh noted significant opportunity exists in defence exports as they grew at approximately 46 percent CAGR between FY17-24, with products like missiles, radars, and armoured vehicles exported to over 85 countries. I believe This would be a significant pie down the line.

"On stocks like Cochin Shipyard , Mazagon Dock and HAL, I remain optimistic amidst corrections, still stretched valuations. These might go through a long consolidation cycle before their next move, hence I would recommend a slow accumulation over a a longer period of time. In terms of opportunities in defence sector, I would look at defence exports, defence mobility vehicles, Navy, defence robotics, defence AI, defence training, and simulation should be the next leaders in defence Sector," he added.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.