Israel-Iran war: Apollo Micro Systems to ideaForge — defence stocks extend rally as US attacks Iran

Defence stocks in focus today: Defence stocks continue to attract strong interest on Dalal Street as investors remain focused on the sector, driven by a fresh wave of optimism after the US launched missile strikes on Iran over the weekend, targeting nuclear facilities and further escalating the conflict in the Middle East.

While the front-line indices reacted negatively to the surprise US attacks, dragging the Nifty and Sensex down over 1% in Monday's trade, domestically focused defence players saw their stock prices surge up to 8% on expectations that rising geopolitical tensions could result in increased order flows and expanded defence budget allocations.

Today’s rally in defence stocks was led by Apollo Micro Systems, which jumped 8%, followed by IdeaForge Technology and Swan Defence and Heavy Industries, which gained up to 5%.

Other notable gainers included Avantel, Paras Defence & Space Technologies, Premier Explosives, Astra Microwave, Garden Reach Shipbuilders & Engineers, DCX Systems, Mazagon Dock Shipbuilders, Data Patterns, and Cochin Shipyard, rising between 1.5% and 4.9%.

Defence stocks have made a strong comeback in recent months

After being under pressure for five consecutive months due to valuation concerns, the sector began recovering in March and extended its gains into April. The momentum gained further traction in May following the launch of ‘Operation Sindoor,’ during which India showcased the strength of its indigenously developed defence systems and successfully intercepted drones and missiles launched by Pakistan.

Sentiment was further boosted after Prime Minister Narendra Modi reiterated the government’s commitment to promoting indigenous defence production under the Make in India initiative.

Additionally, strong March quarter earnings have also contributed to the rally in defence stocks and the latest tensions between Iran and Israel, with the US now joining the war— have further bolstered the demand for defence stocks on exchanges. 

Growing orders are likely to keep momentum in defence stocks intact

Despite valuation concerns, investors continue to add defence stocks to their portfolios amid expectations that rising orders will drive margin improvement. According to rating agency ICRA, entities operating in the defence sector are expected to sustain robust growth momentum, with projected revenue expansion of 15%–17% in FY2026.

This strong revenue growth is primarily driven by solid execution, backed by a robust order book, with the order book-to-operating income (OB/OI) ratio at 4.4 times as of the end of FY2025. Supported by the government’s consistent budgetary allocation and policy push for the sector, ICRA has assigned a positive outlook to defence.

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 making any investment decisions.