India’s defence sector stocks extended their winning streak for the third consecutive session on May 26, buoyed by a combination of robust quarterly earnings, bullish investor sentiment, and strong political support from the government. The Nifty India Defence index climbed nearly 1.5% during the session, continuing its record-setting run amid hopes of a sharp expansion in orderbooks driven by increased capital expenditure, strong exports, and Prime Minister Narendra Modi’s vocal endorsement of domestic defence manufacturing.
Highlights:
Nifty India Defence index rose nearly 1.5% on May 26, third session of gains.
PM Modi’s ‘Mann ki Baat’ comments reignite investor optimism in ‘Make in India’.
Analysts warn of stretched valuations, urging selective buying strategies.
BEML Leads the Surge on Strong Q4 Results, Data Patterns and Solar Industries Follow
The rally was led by BEML, which surged over 12% after the company posted a 12% year-on-year jump in net profit to ₹288 crore for Q4 FY25, while revenue from operations rose 9% to ₹1,652.53 crore. The strong financials sparked renewed interest in the stock, reflecting optimism about BEML’s ability to capture future defence and infrastructure orders.
Data Patterns also witnessed a sharp rally of over 6%, driven by bullish outlooks on high-margin electronic warfare and avionics orders. Solar Industries and Mazagon Dock Shipbuilders added around 3% each, while Hindustan Aeronautics Ltd (HAL) and DCX India gained over 1.3%. Other defence-related stocks like Paras Defence, Bharat Electronics Ltd (BEL), and Bharat Dynamics Ltd (BDL) traded with modest gains.
However, not all defence names participated in the rally. Cochin Shipyard and Garden Reach Shipbuilders and Engineers (GRSE) saw marginal declines, indicating some profit booking in selected names after the recent spike.
Highlights:
BEML rose 12% after strong profit and revenue growth in Q4 FY25.
Data Patterns jumped 6%, Solar Industries and Mazagon Dock gained 3%.
HAL and DCX India rose 1.3%+, while GRSE and Cochin Shipyard saw minor losses.
PM Modi’s ‘Mann ki Baat’ Sparks Renewed Enthusiasm for Domestic Defence Manufacturing
Investor confidence received a fresh boost after Prime Minister Modi, in his April 25 radio address ‘Mann ki Baat’, lauded the success of Operation Sindoor, crediting the victory to Made-in-India defence platforms. He hailed the role of engineers and technicians, calling the mission a “testament to India’s blood and sweat” and underlining that “weapons, equipment and technology made in India” were critical to the success.
His comments have reignited retail and institutional interest in domestic defence names that are beneficiaries of India’s self-reliance and import substitution strategies. The market interpreted Modi’s remarks as further validation of the Make-in-India initiative, increasing expectations of sustained government procurement in upcoming quarters.
Highlights:
PM Modi highlighted India-made weapons as key to Operation Sindoor’s success.
His comments were seen as political backing for the domestic defence industry.
Investors expect increased government orders and policy continuity post-election.
Rising Geopolitical Tensions and Strategic Relevance Support Sector Outlook
The sector is also benefiting from renewed geopolitical tensions, particularly on the India-Pakistan front, with analysts noting that strategic and national security imperatives are driving continued investments in defence. The government’s consistent push to enhance domestic capability, coupled with India’s rising defence exports, has added further strength to the long-term narrative.
Divyam Mour, Research Analyst at SAMCO Securities, noted that “the run-up in defence stocks is partly driven by rising India-Pakistan tensions, which have reaffirmed the sector’s strategic relevance.” He also emphasized that while the long-term case for defence remains intact, valuations have become stretched in some segments, especially among private defence firms with ambitious growth targets.
Highlights:
India-Pakistan tensions reaffirm sector’s strategic importance.
Rising exports and policy push improve long-term fundamentals.
Private defence stock valuations seen as aggressive; caution advised.
Valuation Concerns Surface Amid Momentum; Analysts Urge Caution
While the short-term momentum remains strong, analysts are beginning to flag valuation concerns. Pankaj Kumar, VP – Fundamental Research at Kotak Securities, cautioned that “given current valuations, any earnings disappointment could derail the momentum.” He added that although sentiment is bullish, the bar for performance is now significantly higher, especially for mid-sized and private defence firms.
Mour echoed similar views, suggesting that pullbacks or consolidations may offer better entry points into fundamentally strong defence companies. He advised that investors focus on selective buying strategies rather than chasing the ongoing rally indiscriminately.
Highlights:
Analysts caution that current prices reflect high growth expectations.
Earnings miss could lead to steep corrections in overvalued stocks.
Long-term prospects intact, but selective and disciplined buying is advised.
