Defence stocks tank despite market surge, BEML, Midhani, GRSE slump over 5%, BEL, HAL, BDL, Paras all in red

Defence stocks crashed in early trade on Tuesday on profit booking at higher level following US President Trump’s announcement of a ceasefire between Israel and Iran, although they are yet to head towards it.

Despite the upward momentum of equity benchmark indices, Nifty defence index declined by 2 per cent at around 10 am. The defence sector saw strong traction on Monday, particularly in shipbuilding stock.

Shares of BEML, Mishra Dhatu Nigam Ltd (Midhani) and Garden Reach Shipbuilders Ltd (GRSE) tanked 5-6 per cent.

Paras Defence, Astra Microwave, Data Patterns, Bharat Dynamics and Zen Technologies depreciated 3-4 per cent.

Additionally, Cochin Shipyard, Unimech, HAL and Mazagon Dock declined by 2 per cent.

BEL, Solar Industries, DCX Systems and Mtar Technologies also dipped to trade in negative territory.

A latest report by InCred Equities highlighted that defence sector plays a pivotal role in ensuring national security and sovereignty, driven by the strategic oversight of the Ministry of Defence.

InCred Equities estimated the defence budget to grow by 10 per cent y-o-y in FY27, driven by rising geopolitical pressure, particularly in the Indo-Pacific region and along India’s borders with China and Pakistan.

The private sector has also played a pivotal role, particularly in exports, with its share in defence exports rising from 13 per cent in 2016-17 to 62 per cent in 2023-24. Total defence exports have skyrocketed at an annual growth rate of 46 per cent, reaching ₹210.83 billion in 2023-24, driven by items like missiles, radars, and armoured vehicles exported to over 85 countries, it added.

It also emphasised that defence exports are relatively very low, a mere 0.2 per cent to global exports in 2020-24, but there is a headroom for growth.

It said, among the defence public sector undertakings (DPSUs), Hindustan Aeronautics (HAL) and Bharat Electronics (BEL) stand out as the leading contributors, collectively accounting for 50 per cent of the total production.

InCred assigned add rating at a target price of ₹6,325 on HAL, emphasising it as a clear beneficiary of indigenisation with robust growth.

BEL’s proven execution as a battle-tested leader with strong order pipeline makes it a compelling buy at a target price of ₹459, it said.