The shares of defence companies dropped sharply in trade on August 8, pushing the Nifty India Defence index down nearly 2 percent. Weak earnings by some of the key players, profit booking and lack of fresh triggers fuelled the downturn in the sector.
The defence index dropped to 7,662, as seen at 2 pm. The index has now extended losses for the third consecutive session.
Defence shares came in focus after the Indian military in May conducted targeted strikes against terrorist outfits in Pakistan and Pakistan occupied Kashmir under the codename 'Operation Sindoor'. As the geopolitical tensions between India and Pakistan eased, the escalating wars between Russia-Ukraine and Israel - Iran further boosted the stocks. Additionally, NATO members agreed to a big increase in their defence spending target, which fuelled the bullish sentiment further. The Nifty India Defence index jumped a whopping 42 percent since 2024 closing to hit a record high in June.
However, as geopolitical tensions around the globe continue to ease, the defence stocks declined. Analysts flagged elevated valuations, despite the positive sentiment around the stocks.
Data Patterns shares dropped nearly 6 percent to trade at Rs 2,426 apiece. The company on August 7 reported a 22 percent YoY and 75 percent QoQ drop in net profit to Rs 25.5 crore for Q1 FY26. Its revenue from operations meanwhile tumbled around 75 percent sequentially to Rs 99 crore during the quarter under review.
Mazagon Dock Shipbuilders shares declined nearly 5 percent to trade at Rs 2,657 apiece. The company on July 28 reported a net profit of Rs 452 crore for the first quarter of the financial year 2026. This marks a decline of around 35 percent on-year from the Rs 696 crore net profit reported in the corresponding quarter of the previous financial year.
DCX India, Paras Defence and Bharat Dynamics (BDL) shares dropped up to 4 percent each, while Solar Industries, Cochin Shipyard and Hindustan Aeronautics (HAL) shares fell more than 2 percent each.
Garden Reach Shipbuilders & Engineers (GRSE), BEML and Bharat Electronics (BEL) shares were trading in the red with marginal losses. GRSE on August 8 reported a net profit of Rs 120 crore for Q1 FY26. This marks a 38 percent on-year rise from the Rs 87 crore net profit reported in Q1 FY25. However, net profit nearly halved sequentially from the Rs 244 crore reported in Q4 FY25.
"Indian defence stocks have entered a consolidation phase after a strong rally earlier this year...recent price action suggests a cooling-off period. Some institutional investors have begun booking profits, especially in stocks that had run up sharply. Valuations, in certain cases, had moved well ahead of fundamentals, prompting a tactical pullback...The sector’s trajectory from here is likely to be more measured—balancing near-term volatility with medium-term promise. Selectivity and disciplined entry points will be critical as defence transforms from a thematic play into a core allocation theme over the coming years," said Bhavik Joshi, Business Head, INVasset PMS.
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