Defence stocks: HAL, Bharat Dynamics, Mazagon Dock, others crack up to 6% despite India-Pakistan conflict

Stock market today: Indian defence stocks such as Hindustan Aeronautics and Mazagon Dock Shipbuilders tumbled sharply on Wednesday, May 7, despite escalating tensions between India and Pakistan after India carried out its deepest strikes inside Pakistani territory since 1971.

According to market experts, defence stocks have already witnessed a significant run-up in recent sessions, particularly following the Pahalgam terror attack. As a result, investors may be booking profits or adopting a wait-and-watch approach amid geopolitical uncertainties. Moreover, experts also highlighted that these stocks are trading at rich valuations, which is keeping investors on the sidelines

Shares of Bharat Dynamics, Hindustan Aeronautics, Bharat Electronics, and BEML fell by up to 6.12% in trade.  Shipbuilding stocks such as Mazagon Dock Shipbuilders, Garden Reach Shipbuilders, and Cochin Shipyard followed a similar trend, declining up to 5%. This resulted in a nearly 2% drop in the Nifty Defence index, which fell to the 6915 level. 

On May 7, 2025, India launched a series of missile strikes into Pakistani territory and Pakistan-administered Kashmir under "Operation Sindoor," targeting nine locations alleged to be militant infrastructure.

This action was in retaliation for the April 22 Pahalgam attack in Indian-administered Kashmir, which resulted in the deaths of 26 Indian tourists and was attributed to Pakistan-based militant groups.

Dr. Vikas Gupta, CEO & Chief Investment Strategist at OmniScience Capital, said, "Defence companies have large order books which will get even larger. Operation Sindoor is likely to put the focus on pace of execution in the Defence companies. These companies are likely to be given aggressive execution targets which are likely to start becoming visible in a few quarters and 1-3 years' time line, thus possibly boosting revenues and earnings forecast."

"Similarly, the companies operating in other dimensions, i.e. non-arms and ammunition, of Defence, such as, cyber security, strategic minerals & rare earths, oil & gas, hydro-projects, military EPC, military logistics and railways are also likely to see execution at a higher pace. However, one should be careful to invest only at attractive valuations and in those which pass the scientific investing criteria," he further added.

Indian stock market remains range-bound despite geopolitical tensions

Following the missile strikes into Pakistani territory, the Indian stock market traded in a narrow range on Wednesday, May 7. In contrast, the Pakistan Stock Exchange saw a sharp crash, with the benchmark KSE-30 Index tumbling as much as 6.1% to its lowest level since December 4 before recovering some losses.

Market experts don’t foresee any major immediate impact on the Indian stock market. They noted that India did not target Pakistani military bases directly and the strikes were calculated and limited in scope.

“What stands out in ‘Operation Sindoor’ from the market’s perspective is its focused and non-escalatory nature. We have to wait and watch how the enemy reacts to these precision strikes by India. The market is unlikely to be impacted by the retaliatory strike by India, since that was known and already discounted,” said V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Meanwhile, the trade deal with the UK provides India a potential template for its ongoing negotiations with the US. Additionally, local assets were supported by a rebound in regional markets, driven by China’s economic stimulus measures.

India’s markets have recently caught the attention of global funds, drawn by the country’s resilience to trade uncertainty and support from the Reserve Bank of India’s rate cuts and aggressive liquidity measures. FPIs have remained net buyers over the 14 consecutive trading sessions, pumping in a cumulative ₹43,940 crore into Indian equities, according to data compiled by Livemint.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.