Indian defence stocks have witnessed a historic rally, surging nearly 18% in just six trading sessions, following the resounding success of Operation Sindoor and a renewed government focus on indigenous military capabilities.
Operation Sindoor Ignites Market Momentum
Operation Sindoor, India’s swift and precise military response to the April 22 Pahalgam terror attack, has dramatically shifted investor sentiment toward the defence sector. The operation, which targeted terror camps in Pakistan and Pakistan-occupied Kashmir, showcased India’s growing prowess in home-grown defence technology and strategic military planning. The success of indigenous systems in live combat has not only bolstered national security confidence but also ignited a wave of optimism in the stock market.
Defence Index Outperforms Broader Markets
The Nifty India Defence Index, a sectoral benchmark tracked by most defence mutual funds, soared by 5.5% on Friday to close at 8,309.15, marking an 18% gain over the past week-far outpacing the modest 3% rise in the broader Nifty 50 index. This surge has brought the index to its highest level since July 2024, reflecting sustained investor interest and robust market momentum.
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Top Gainers
- Cochin Shipyard: Up nearly 40% in the past month, leading the rally.
- Paras Defence & Space Technologies: Gained over 37%.
- Bharat Dynamics: Rose by 24–27%.
- Garden Reach Shipbuilders & Engineers, Mazagon Dock Shipbuilders, Data Patterns: Notched gains between 10% and 35%.
Several stocks, including Bharat Electronics, Bharat Dynamics, Mazagon Dock Shipbuilders, Paras Defence, and Solar Industries, reached all-time highs on the NSE during this period.
Mutual Funds Ride the Defence Wave
Defence-oriented mutual funds have delivered exceptional returns, with one-month gains ranging from 13.67% to 18.75%. The Groww Nifty India Defence ETF and Aditya Birla Sun Life Nifty India Defence Index Fund both reported returns above 18%, while the HDFC Defence Fund delivered a solid 13.67% return. The average return across these funds stands at an impressive 17.7%, significantly outperforming most other equity categories.
Policy Boost: Rs 50,000 Crore Additional Defence Allocation
Adding to the sector’s tailwinds, government sources have confirmed a proposed Rs 50,000 crore increase in India’s defence budget, pushing the total allocation past Rs 7 lakh crore. This supplementary funding, expected to be approved in the upcoming Parliament session, will be directed toward research and development, procurement of weapons, and modernization of military infrastructure. The move underscores the government’s commitment to strengthening national security and supporting domestic defence manufacturing.
PM Modi’s Call for Self-Reliance
Prime Minister Narendra Modi’s strong endorsement of “Made in India” defence equipment has further fueled market enthusiasm. In his address following Operation Sindoor, PM Modi highlighted India’s dominance in modern warfare and reaffirmed a zero-tolerance policy towards terrorism, signaling a long-term policy shift towards self-reliance in defence production.
“We have proven our dominance in modern warfare. The time has come for ‘Made in India’ defence equipment. We’ve adopted a zero-tolerance policy towards terrorism.” – Prime Minister Narendra Modi
Global Context: India Up, China Down
While Indian defence stocks soared, Chinese defence firms experienced sharp declines. Companies supplying military hardware to Pakistan, such as Avic Chengdu Aircraft Co. and Zhuzhou Hongda Electronics Corp, saw their shares drop by 7–10% in the wake of Operation Sindoor and India’s successful strikes. This divergence highlights shifting regional dynamics and growing global recognition of India’s indigenous defence capabilities.
Outlook
With robust government support, increased budget allocations, and the proven effectiveness of domestic defence technologies, analysts expect continued momentum in the sector. However, experts advise investors to monitor valuations as the rally continues.
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