Defence stocks in India rallied sharply on 17 June 2025 amid escalating tensions between Israel and Iran. With the conflict entering its fifth day, market participants anticipate increased defence spending, boosting investor sentiment toward India’s defence manufacturers.
Amid rising geopolitical tensions due to the ongoing Israel-Iran conflict, defence stocks in India witnessed a strong rally, reflecting investor confidence in heightened global demand and anticipated government spending on military preparedness.
The Nifty India Defence Index, which tracks the performance of India’s top defence companies, surged by over 1.6%, breaching the 9,000 mark during Tuesday’s trading session.
Leading the gains was Mazagon Dock Shipbuilders, a state-owned shipbuilding company based in Maharashtra, which saw its share price climb over 5%. Garden Reach Shipbuilders & Engineers (GRSE), also a key public-sector shipyard, advanced over 4%, followed by a 3% rise in Data Patterns (India) Ltd..
Other major gainers included Bharat Dynamics Ltd., Cochin Shipyard, Hindustan Aeronautics Ltd. (HAL), and Solar Industries India, each registering between 1–2% gains.
This market rally is being attributed to expectations of increased defence spending in India and abroad, given the intensified conflict in the Middle East and ongoing tensions between other global powers.
Earlier in 2025, India’s defence firms had already experienced strong quarterly results, supported by better execution and the government’s push for indigenization. The sector’s market cap reached an all-time high in May 2025, with a Compound Annual Growth Rate (CAGR) of 55% since FY19. Aggregate Profit After Tax (PAT) across the sector has risen by a CAGR of 23% during the same period.
Export-driven growth remains another key driver. India aims to boost defence exports to ₹25,000 crore by FY26. Firms with export-oriented operations like HAL and BDL are well positioned to benefit from this long-term vision.
However, analysts caution that current valuations may be stretched following this recent surge. While the long-term growth story of India’s defence sector remains intact, the sharp rally could reflect more sentiment than fundamentals in the short term.
Despite valuation concerns, the consensus remains that defence stocks could continue to benefit from emergency procurement measures and strategic investments spurred by global and regional tensions.
