Defence shares fall for 3rd day even as analysts see upside for defence PSUs after DAC approves Rs 79,000-cr proposals

Defence shares see profit booking in trade today.

• Nifty Defence index fell 1.5 percent, extending its decline for a third session
• Recent DAC approvals worth Rs 79,000 crore support medium-term sector outlook
• Profit booking caused losses despite strong long-term orders for defense firms.

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Defence shares extended their decline for a third straight session on Tuesday, with the Nifty Defence index falling 1.5 percent amid broad-based selling in the sector, even as analysts remain positive on the medium-term outlook following recent approvals by the Defence Acquisition Council (DAC).

The Nifty Defence index has now declined over 2 percent in the last three sessions. In Tuesday’s trade, 16 of the 18 constituents of the index were trading in the red.

Shares of Mazagon Dock Shipbuilders led the losses, slipping up to 4 percent. Solar Industries India declined 3.5 percent, while Data Patterns (India) fell around 3 percent.

The decline comes amid profit booking, despite the DAC recently approving procurement proposals worth over Rs 79,000 crore, covering upgrades, overhauls and fresh procurement across key defence platforms.

PL Capital noted that over the past few months, the DAC has accorded Acceptance of Necessity (AoN) for proposals aggregating around Rs 3.30 lakh crore across the Army, Navy and Air Force. These span missiles and air defence systems, electronic warfare and sensors, unmanned and autonomous systems, naval platforms, mobility solutions, and lifecycle upgrades and maintenance.

The approvals provide strong multi-year order visibility and support higher localisation and private sector participation.

"We believe these AoNs provide strong multi-year order visibility, support higher localisation and private-sector participation, and improve execution and earnings visibility for domestic defence manufacturers, particularly across missiles, electronics, unmanned systems, naval shipbuilding and sustainment services," it said.

It added that on December 29, 2025, the DAC accorded AoN for procurement proposals aggregating about Rs 79,000 crore, reinforcing the medium-term defence capital expenditure pipeline.

PL Capital said key approvals include long-range guided rocket ammunition for the Pinaka system, which is expected to benefit Solar Industries India, and the Astra Mk-II missile, which should mainly benefit Bharat Dynamics and Bharat Electronics. Other approvals across drones, radars, naval and Indian Air Force platforms are expected to provide incremental opportunities for a wider set of domestic defence companies.

Motilal Oswal said the DAC approvals span a wide spectrum of capabilities, including munitions, missiles, air defence systems, surveillance and communication equipment, training systems and naval support platforms.

"While the AoN approvals do not immediately translate into order inflows, the breadth and scale of the approvals materially de-risk order inflows for key defence PSUs and select private players over the next two to four years," it said.

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