India’s Defence Stocks declines Up to 7% Amid Israel-Iran Truce

Indian defence stocks witnessed a sharp sell-off on June 24, 2025, snapping a two-day rally that had been fuelled by heightened tensions between Israel and Iran. The announcement of a tentative ceasefire by US President Donald Trump triggered widespread profit booking, with the Nifty India Defence index falling 2.2% in the session. Seventeen of the eighteen constituents of the index traded in the red, underscoring broad-based weakness across the sector.

Major Losers: BEML, GRSE, Mishra Dhatu Lead the Decline

Among the biggest decliners, Garden Reach Shipbuilders & Engineers (GRSE) plunged nearly 7% to an intraday low of ₹3,251 on the NSE, erasing recent gains. BEML and Mishra Dhatu Nigam (Midhani) also tumbled sharply, down 5.92% and 5.22% respectively. Other notable laggards included Astra Microwave Products, Paras Defence and Space Technologies, Zen Technologies, Bharat Dynamics Ltd (BDL), and Data Patterns (India), which fell between 2% and 5%.

Heavyweights such as Cochin Shipyard, Hindustan Aeronautics Ltd (HAL), Mazagon Dock Shipbuilders, and Bharat Electronics Ltd (BEL) lost ground as well, slipping up to 3%. BEL was relatively resilient, declining just 0.26%, while Cyient DLM was the sole gainer in the index, rising over 1.68%.

Profit Booking After Substantial Gains

The defence sector had been one of the top performers since early June, driven by investor expectations of increased government defence spending and order inflows amid the Middle East conflict. GRSE, for instance, had increased 17% since June 13, while BEML, BEL, Zen Technologies, and Cochin Shipyard recorded gains between 5% and 14% during the same period.

The ceasefire announcement dampened these prospects temporarily, prompting investors to lock in profits. Analysts noted that the market is now reassessing the likelihood of sustained elevated defence budgets and order inflows in the absence of prolonged geopolitical conflict.

Sector Outlook: Strategic Importance Remains Intact

Despite the short-term correction, the strategic importance of the defence sector remains unchanged. The Indian government’s continued focus on indigenisation and Atma Nirbhar Bharat initiatives is expected to support long-term growth.

Brokerage firm Nirmal Bang highlighted that the sector’s fundamentals are underpinned by rising defence budgets, with a projected 10% year-on-year increase for FY27. Moreover, escalating geopolitical tensions in the Indo-Pacific region, including India’s border disputes with China and Pakistan, continue to justify robust defence spending and modernisation efforts.

Market Implications and Investor Strategy

The correction in defence stocks presents a potential entry point for long-term investors, given the sector’s growth trajectory and government support. However, near-term volatility is likely to persist as markets digest geopolitical developments and their impact on defence procurement cycles. Traders will monitor order inflows, budget announcements, and global geopolitical dynamics closely. Select stocks with strong order books and proven execution capabilities, such as HAL, BDL, and BEL, may offer relatively better risk-reward profiles.

Conclusion

The sharp decline in defence stocks on June 24 reflects profit booking following the easing of Middle East tensions and a tentative ceasefire between Israel and Iran. While the immediate rally has paused, the sector’s strategic relevance and long-term growth prospects remain robust. Investors should remain vigilant to geopolitical developments and government policy signals as they navigate the evolving defence landscape.

Disclaimer: This news is solely for educational purposes. The securities/investments quoted here are not recommendatory.

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