Shares of defence companies fell sharply on June 24, ending their two-day rally, after news of a ceasefire between Israel and Iran led to profit booking by investors.
BEML and GRSE stocks dropped as much as 7%, pulling down the broader Nifty India Defence index by 2.2%.
The decline came after US President Donald Trump announced that a ceasefire agreement had been reached, signalling an end to the recent conflict in West Asia. This development also caused crude oil prices to fall and eased fears of a broader geopolitical crisis.
Tensions Eased, Investors Booked Profits
For the past few sessions, investors had built positions in defence stocks, expecting higher government defence spending and more order flows to Indian defence companies in case of an extended conflict.
But with the ceasefire news, investors rushed to book profits, reversing the gains made between June 20 and 23, when the sector had surged over 4%.
“The dramatic developments in West Asia indicate the worst of the conflict is likely over,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Conclusion
With geopolitical tensions cooling off, defence stocks have taken a breather as investors reassess the situation. While long-term fundamentals may remain intact, short-term sentiment has clearly shifted on signs of de-escalation in West Asia.
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