Defence stocks explode Rs 43,000 crore in single day: Is this the dawn of a super rally?

Defence stocks delivered a thunderous Rs 43,000 crore windfall in a single trading session on Friday, propelling the Nifty Defence index to multi-week highs and sparking debate on Dalal Street over whether this momentum signals the start of a fresh rally.

The defence sector staged a spectacular rebound, with the Nifty Defence index surging 4.3% to an eight-week peak of 8,041, marking weekly gains of nearly 8%—its sharpest increase in four months. Leading the charge were PSU heavyweights like GRSE, Bharat Dynamics, and Cochin Shipyard, alongside private defence players including MTAR, BEML, and Astra Microwave, with stocks climbing up to 10%.

The rally gained traction as negotiations began for six next-generation conventional submarines, while the Ministry of Defence's comprehensive 15-year modernisation roadmap, unveiled on September 5, continues to fuel investor optimism.

"Defence has a very long runway. For the next five years at least, there is strong visibility in most defence companies," said market expert Nischal Maheshwari. He cautioned, however, that "for the next two years, much of this visibility is already priced in. If you want to add defence, it should be on corrections."

Maheshwari highlighted the massive order books already secured: "HAL has an Rs 2 lakh crore order book, while Mazagon Dock and Cochin Shipyard have Rs 50,000–70,000 crore each. Another Rs 5,000–10,000 crore will not significantly change the picture, given execution limits."

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The technical charts are increasingly bullish. The Nifty India Defence index broke a downward sloping trendline on the daily chart, signalling a trend shift, noted Sudeep Shah, Vice-President & Head of Technical and Derivatives Research at SBI Securities. "The index has also surged above key moving averages, which are now sloping upwards—a bullish sign. The daily RSI has crossed 60 for the first time since June 2025, indicating strengthening momentum."

Amnish Aggarwal of Prabhudas Lilladher called the structural story intact: "Defence remains a structural story, reflecting government initiatives over the past 5–10 years in promoting the local industry. This is now evident in order books and the growth of these companies."

Long-term bulls remain undeterred by valuation concerns. "The long-term case for the segment is strong. Valuations fluctuate, but it’s a multi-decade story," said Ajay Bagga. "We have the technical expertise to produce low-cost weaponry, a domestic market to serve first, and an export market next."

Drawing parallels with China’s defence transformation, Bagga added: "From 2000 onwards, China built significant defence capabilities. India is following a similar path, evident in recent deliveries like jet engines."

Key gainers in Friday’s rally included GRSE, MTAR Tech, Astra Micro, and Paras Defence, which surged 5–10%, driven by a robust order pipeline and rising geopolitical tensions highlighting the strategic importance of domestic defence capabilities.

The sector’s volatility remains a defining trait, with gains often followed by corrections. "You have to hold for the long term and let valuations adjust, because the runway for defence is clear," Bagga concluded.

As defence stocks ride this wave of optimism, investors are left with a fundamental question: does Friday’s Rs 43,000 crore surge mark the beginning of a structural super rally, or is it another chapter in the sector’s famously volatile journey.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)