India’s defence industry has entered a phase of transformation. From traditionally being dominated by public sector units to now witnessing rising private sector participation, the Indian defence sector is experiencing renewed investor confidence, thanks to a mix of geopolitical clarity, policy reforms, and a robust push for Atmanirbhar Bharat.
The turning point? Operation Sindoor, India’s strategic and successful cross-border counterterrorism action that not only reaffirmed its defence capabilities but also catalysed a sharp rally in Indian defence stocks.
Operation Sindoor: Catalyst for Defence Sector Re-Rating
Operation Sindoor, widely recognised as India’s boldest military initiative in recent years, was not just a geopolitical manoeuvre but also a signal to the world of India’s military readiness and precision strike capabilities. Following this development, Prime Minister Narendra Modi, in his national address, emphasised India’s zero-tolerance approach to terrorism and rejected any notion of nuclear blackmail.
Markets quickly responded to this assertiveness. The defence sector in India saw a sector-wide re-rating.
Defence Sector Stocks Rally: Key Winners in Focus
The defence theme is being increasingly viewed as a multi-year growth opportunity, supported by rising domestic procurement, technology partnerships, and export ambitions. Here are some major defence sector stocks that have benefited post-Operation Sindoor:
- Monthly Gain: ~74%
- Recent High: ₹1,816.80
- Trigger: Signed an MoU with Israel’s HevenDrones on 5 May 2025, to jointly explore drone opportunities in India and globally. Read more about it on our blog on the same.
The Paras Defence share price has nearly doubled over the past month. As the only Indian firm with space-optics capabilities and advanced nano-fabrication units, Paras stands at the intersection of drone technology, space optics, and defence electronics—all high-growth areas.
- Monthly Gain: ~21%
- Recent High: ₹5,127.70
HAL stock surged on the back of increased expectations for fighter jet and helicopter orders, spurred by a heightened focus on indigenous air power after Operation Sindoor. The company remains central to India’s air defence capabilities and continues to benefit from export interest across Asia and Africa.
- Monthly Gain: ~24%
- Recent High: ₹363.90
BEL stock gained due to its stronghold in electronic warfare, communication systems, and radar technology. Being a cornerstone of India’s defence infrastructure, BEL is expected to play a major role in future military digitisation initiatives.
- Monthly Gain: ~52%
- Recent High: ₹2,868.20
This high-margin player in indigenous defence electronics and embedded systems has been a favourite among institutional investors. The company’s participation in missile systems, drone subsystems, and satellite payloads makes it a strategic pick in the ongoing defence revival.
- Monthly Gain: ~29%
- Recent High: ₹3,522.40
With India's Navy stepping up focus on coastal surveillance and blue-water capability post-Sindoor, Mazagon Dock stands to benefit from submarine and stealth ship orders. The company has also been in discussions for global naval collaborations.
- 1-Month Gain: ~20%
- Recent High: ₹1,263
Bharat Forge, a major player in defence manufacturing, has increased its presence in artillery systems and is working with the Ministry of Defence to build future-ready land combat solutions. Growth in artillery systems, armoured vehicle components, and global defence exports.
- 1-Month Gain: ~32%
- Recent High: ₹1,842
BDL stock has been on a strong uptrend due to anticipated demand for next-gen missile systems, both from Indian forces and international allies. Expected orders for missile systems like Akash and Astra, plus export potential.
- 1-Month Gain: ~41%
- Recent High: ,035.6
Cochin Shipyard is gaining recognition for its strategic importance to India's maritime capabilities (Naval contracts, deep-sea vessels, and strategic shipbuilding). Its execution on large projects, including indigenous aircraft carriers, has made it a vital PSU in India’s blue-water navy ambitions.
Defence Policy Framework: Fuel Behind the Fire
The recent rally is not speculative. It is rooted in structural policy changes aimed at making India a global defence manufacturing hub. Here are some initiatives driving sustained sector growth:
- Defence Budget Allocation: In the last Union Budget, nearly 68% of capital procurement was reserved for domestic sources.
- Positive Indigenisation List: Banning imports of over 500 defence items to boost local production.
- FDI Reforms: 74% FDI under automatic route in defence manufacturing.
- iDEX Scheme: Government-backed innovation platform to support defence startups and MSMEs.
- Exports Push: India’s defence exports have grown over 10x in the past six years, reaching new markets in Africa, Southeast Asia, and Latin America.
These policy pillars are aligning well with investor expectations, thereby turning defence from a cyclical story into a long-term structural play.
Key Themes Driving the Defence Sector Rally
- Geopolitical Aggression: Operation Sindoor has reset India’s military posture, enhancing the need for rapid capability upgrades.
- Indigenisation Drive: Programmes like ‘Make in India’ and ‘Atmanirbhar Bharat’ are forcing a shift from import dependence to self-reliance.
- Private Sector Participation: Companies like Paras Defence, Data Patterns, and Astra Microwave are entering previously PSU-dominated areas.
- Export Opportunities: India's indigenous products like BrahMos, Akash systems, and Tejas fighters are gaining global interest.
- Technological Advancements: New growth drivers like drones, AI-powered surveillance, EMP protection, and hypersonic weapons are giving rise to specialist companies.
Investor Risks and Valuation Caution
While the story is compelling, the valuation matrix is now steep. For instance:
- Paras Defence is trading at over 114x P/E.
- Data Patterns commands a premium P/E of over 80x.
- Many defence stocks have entered overbought zones on technical indicators.
Execution risks, delayed contracts, and changes in defence procurement timelines remain factors that can affect short-term performance. Hence, analysts suggest a staggered entry strategy and selective stock picking.
The Road Ahead: Strategic Industry with Structural Upside
India’s defence sector is no longer an afterthought on Dalal Street. It is a strategic growth theme that aligns with national interests, technology development, and global supply chains.
Post-Operation Sindoor, the message from both the government and the market is clear that defence is a priority, and companies that innovate, deliver, and scale will continue to create shareholder value.
For long-term investors, this may be the time to look beyond the short-term price action and focus on secular trends. Whether through PSUs like HAL and BEL, or emerging leaders like Paras Defence and Data Patterns, India’s defence sector is poised to be a major contributor to the country’s technological and economic ascent.