The defence shares led by the shipyard stocks like Garden Reach Shipbuilders & Engineers (GRSE), Mazagon Dock Shipbuilders and Cochin Shipyard had rallied sharply yesterday, leading to a 5% surge in the Nifty India Defence index.
The sharp surge in the shipyard stocks yesterday came after GRSE reported its highest-ever annual turnover of Rs 6,400 crore for financial year 2026, marking a 26% jump from Rs 5,076 crore in the previous year. Additionally, Cochin Shipyard was added to the NSE‘s futures & options (F&O) segment, leading to expectations of greater liquidity and higher trading volumes.
Broader market weakness
The sharp decline in defence stocks also comes amid broader market weakness. Sensex crashed around 1,400 points and Nifty fell below 22,250 in the morning on Thursday, almost wiping out all gains made on Wednesday and erasing more than Rs 9 lakh crore from the total market capitalisation of all companies listed on BSE.
GRSE shares declined around 6% to trade at Rs 2,209 apiece. Data Patterns, Mazagon Dock Shipbuilders and Cochin Shipyard shares dropped around 5% each, while BEML, Bharat Dynamics (BDL), Paras Defence, Midhani, Bharat Forge, Zen Technologies and Solar Industries shares tumbled nearly 3% each. Hindustan Aeronautics (HAL) and Bharat Electronics (BEL) shares fell around 2% each.
What lies ahead?
Earlier in March, India’s Defence Acquisition Council (DAC) approved proposals worth Rs 2.38 lakh crore, leading to brokerages issuing bullish calls for the defence sector. DAC, chaired by Defence Minister Rajnath Singh, granted approval for various proposals, including S-400 long range surface-to-air missile system and overhaul of Su-30 aero engine aggregates. Thus, AoN for 55 proposals amounting to Rs 6.73 lakh crore has been accorded by the DAC in the financial year 2026.
Motilal Oswal Financial Services said that the approvals focus on enhancing surveillance, combat and long-range strike capabilities across army, air force and coast guard. These orders will be procured through imports as well as indigenization and provide a healthy addressable market for domestic players too, the domestic brokerage said.“Defence companies already have strong order books and can benefit incrementally from export opportunities. Near-term challenges may be seen in the procurement of imported components, while the focus on indigenization is continuously reducing dependence on imports. We maintain our positive stance on the defence sector, and within our coverage universe, Bharat Electronics remains our top pick,” it added.
According to Motilal Oswal, Bharat Electronics (BEL) is well positioned to benefit in the near term. “The Indian Navy’s next-generation corvette program, which has received CCS approval and is estimated to be worth ~Rs 400b for eight ships. The order will first be given to GRSE (L1) for five ships and Goa Shipyard (L2), after which BEL will secure orders for the electronic suites and onboard defence systems,” the brokerage said. It maintained its estimates and reiterated its ‘Buy’ rating on the stock, with a target price of Rs 520 apiece.
For Hindustan Aeronautics (HAL), Motilal maintained its ‘Buy’ rating with a target price of Rs 5,500 apiece. The domestic brokerage also held ‘Buy’ call for Bharat Dynamics (BDL) and Astra Microwave shares, but a ‘Neutral’ rating for Zen Technologies.
B&K Securities, meanwhile, held a ‘Buy’ rating for HAL and BEL shares, but a ‘Hold’ call for BDL.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)