Nifty India Defence index snaps 6-day winning streak as investors book profits

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26 Aug, 2025 12:21

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The blistering rally in defence stocks saw a sharp reversal in trade on Monday, May 19, as elevated valuations amid relentless buying gave way to profit-booking. After hitting a fresh 52-week high in early trade, jumping two percent, the Nifty India Defence index took a sharp U-turn, giving up its gains to close one percent lower, effectively snapping a six session long rally.

While counters like Data Patterns, Garden Reach Shipbuilders, and BEML lead the gains, the losses in key constituents such as Mazagon Dock, Paras Defence and Dynamatic Technologies dragged the index into the red. The index settled lower by 1.22 percent.

"An important trend in the market is the sharp rally in defence stocks. Even though this segment has bright medium to long-term prospects, their valuations have become excessive and therefore, investors have to be extremely cautious. Some profit booking in this segment would be appropriate," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

Data Patterns (India) Ltd.'s stock is also rallying sharply on its earnings show for the quarter ended March. The defence player reported a profit after tax of Rs 114.08 crore for the period, higher by 60 percent on-year compared to Rs 71.1 crore posted during the same quarter last year.

Srinivasagopalan Rangarajan, CMD of Data Patterns, told CNBC-TV18 that while order intake has been weak in FY25, it is expected to improve. The company anticipates an order book of around Rs 1,000 crore in FY26 and may take on one or two lower-margin strategic contracts to build capabilities. Export orders, particularly from the UK, are expected to rise, with enquiries coming in from other global markets as well.

Further, the Defence Acquisition Council (DAC) has granted approximately Rs 40,000 crore under emergency powers for procurement of arms and ammunition for the defence forces.

Under the emergency powers granted to them, the armed forces are focusing on acquiring important equipment like surveillance and kamikaze drones, long-range loitering munitions, and ammunition for artillery. Additionally, the procurement will also include air defence systems and various types of missiles and rockets.

As per the report, under the terms of the emergency procurement powers, the armed forces will have to receive the equipment within a specific timeframe once contracts are signed.

This is the fifth tranche of emergency procurement powers granted to the defence forces in the past five years. The emergency procurement powers have helped defence forces significantly by facilitating procurement of necessary spares and munitions to address security threats.