Defence stocks on a tear: Operation Sindoor, policy push trigger up to 39% rally since May 7. More upside on cards?

Defence stocks in focus: India’s defence stocks have been on a strong upward trajectory over the past two weeks, with several counters posting gains of up to 39 per cent since the commencement of Operation Sindoor. Companies such as Garden Reach Shipbuilders & Engineers Ltd (GRSE), Cochin Shipyard Ltd, Mishra Dhatu Nigam Ltd (MIDHANI), Paras Defence and Space Technologies Ltd, Data Patterns (India) Ltd, Bharat Dynamics Ltd (BDL), and Astra Microwave Products Ltd have seen sharp rallies, outperforming broader indices by a wide margin.

While the Nifty Defence index surged 18 per cent during this period, the benchmark Nifty 50 advanced a little over 2 per cent. The sharp rally in the defence basket has been attributed to heightened geopolitical tensions between India and Pakistan, and a renewed push by the Prime Minister towards indigenous defence manufacturing and self-reliance in military technology.

Operation Sindoor: A Catalyst for Confidence in Indian Defence Capabilities

Market experts believe the surge in defence stocks is being fueled by the overwhelming success of Operation Sindoor, which not only met its strategic objectives but also showcased India’s rapidly advancing technological capabilities in warfare. From drone combat and layered air defence to electronic warfare systems, India’s indigenously-developed platforms played a central role in the operation, significantly boosting investor sentiment toward the sector.

“India’s defence sector has come of age, and how! The seamless integration of hi-tech indigenous systems into national defence was done in a telling manner, and that message has been effectively conveyed both at home and abroad,” said Manoranjan Sharma, Chief Economist, Infomerics Valuation and Ratings.

He added that with the Indian military’s capabilities firmly established, the prospects for homegrown defence firms have improved markedly. “Defence stocks are fairly valued considering the competence of Indian products. In the new strategic environment, they are likely to move higher and onwards,” Sharma said.

What Should Investors Do Amid the Surge?

While many investors have rushed to take positions in the booming defence sector, analysts advise a more measured approach. 

Kotak Institutional Equities, in a recent note, cautioned that the market is once again succumbing to “irrational exuberance,” with narratives like defence becoming the latest momentum trade. The firm warned that such stories often have a short shelf life and stressed the importance of having a disciplined exit strategy.

On the other hand, Antique Broking struck a more optimistic tone. It noted that after a prolonged price correction between July 2024 and March 2025, defence stocks have rebounded sharply in April 2025, aided by geopolitical developments and government order approvals worth ₹54,000 crore. The brokerage remains positive on long-term prospects and expects select shipyard stocks to trade at up to 45 times FY27 core earnings. It continues to recommend stocks like Mazagon Dock and GRSE.

However, it flagged uncertainties around Cochin Shipyard due to the lack of clarity on India’s next aircraft carrier project (IAC-II), which could limit upside in the near term.

Vikas Gupta, CEO and Chief Investment Strategist at OmniScience Capital, also advised long-term investors to remain calm and avoid panic buying. “There is no need for FOMO. Keep a watchlist of high-conviction stocks and sectors, and allocate capital steadily over time,” he said.

Stock Performance Snapshot

Stock price data from May 7 highlights the intensity of the rally. Garden Reach Shipbuilders stock has surged nearly 39 per cent, followed closely by Cochin Shipyard and Zen Technologies, each up 36 per cent. MIDHANI rose 33 per cent, while Data Patterns jumped 30 per cent. Astra Microwave Products, Bharat Dynamics, Paras Defence, and Mazagon Dock Shipbuilders gained between 21–29 per cent.

Meanwhile, other prominent defence names like BEML, Bharat Electronics, and Hindustan Aeronautics rose over 12 per cent each, contributing to the sector-wide momentum.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.