Defence-related stocks surged on Friday, May 9, 2025, gaining as much as 4.8% amid rising tensions between India and Pakistan. This escalation follows an aggressive missile strike by Pakistan, which launched eight missiles aimed at Indian territories in Jammu & Kashmir, specifically targeting Satwari, Samba, RS Pura, and Arnia. Fortunately, all missiles were intercepted or neutralised by India's air defence units, according to reports.
As of 10:20 AM on May 9, shares of various defence companies saw significant increases: Bharat Dynamics rose by 3.31%, Hindustan Aeronautics (HAL) by 2.34%, Paras Defence and Space Technologies by 2.08%, Bharat Electronics by 3.41%, Mazagon Dock Shipbuilders by 1.56%, Astra Microwave Products by 3.21%, Garden Reach Shipbuilders & Engineers by 2.2%, and Cochin Shipyard by 0.12%.
Analysts suggest that the military operation, dubbed 'Operation Sindoor', is likely to shift the focus towards the execution pace of defence contracts. Dr. Vikas Gupta, CEO and chief investment strategist at OmniScience Capital, remarked, "Defence companies already have large order books which will get even larger. These companies are likely to be given aggressive execution targets which are likely to start becoming visible in a few quarters and a 1-3 years timeline, thus possibly boosting revenues and earnings forecast." He cautioned investors to ensure they are buying at attractive valuations and only in companies that meet scientific investing criteria.
The backdrop to this market activity is the recent military strikes conducted under Operation Sindoor, which were initiated in response to the tragic Pahalgam terror attack that claimed 26 lives. This operation aimed to curtail Pakistan's capacity to sponsor cross-border terrorism. In this context, the Indian armed forces successfully destroyed nine terror centres operating in Pakistan and Pakistan-occupied Kashmir (PoK).
In a direct response to Pakistan's missile strikes, Indian security forces also detected Pakistani drones and munitions over Jammu city, Pathankot, and Jaisalmer. The armed forces retaliated by targeting air defence radars and systems at multiple locations within Pakistan, successfully neutralising at least one such system in Lahore. The situation prompted Jammu & Kashmir Chief Minister Omar Abdullah to head to Jammu to assess the circumstances following the failed drone attack directed at Jammu city and other areas on May 8, 2025.
On the stock exchange, the fluctuations in defence stocks have caught the attention of investors. On May 8, 2025, HAL's stock closed at Rs 4419.45, down 1.13% from the previous day, while Bharat Electronics closed at Rs 306.80, down 1.05%. Mazagon Dock Shipbuilders saw a slight increase, closing at Rs 2820, up 0.09%. Bharat Dynamics, a key player in the aerospace sector, closed at Rs 1453.50, marking an increase of 0.36%.
The broader market trends also reflect these tensions. On May 8, the Nifty Defence index experienced a significant jump of 1.10%, reaching 7,016.50, although it later traded 0.56% lower at 6,901.05. The fluctuations in the defence sector are indicative of the market's sensitivity to geopolitical developments.
In the wake of these events, defence stocks have seen a rollercoaster of performance. For instance, BEML and Bharat Forge fell as much as 5% on May 8, while BEL was down 1.11% to Rs 306.50 per share. Despite an initial surge in defence stocks earlier in the day, the overall market sentiment shifted, leading to declines across various companies.
Despite these fluctuations, some companies have managed to show resilience. Bharat Dynamics, for example, saw its share price surge by as much as 3.45% to Rs 1,497.80 on May 8 before paring gains to trade slightly lower. Similarly, Data Patterns and MTAR Technologies showed gains, with Data Patterns up 6.43% before settling at a 1.26% increase, and MTAR Technologies climbing 5.28% before trading up 0.38%.
As the situation continues to evolve, investors remain watchful. The dynamics of the defence sector are closely tied to geopolitical events, and the recent military operations have underscored the volatility and potential for growth in this market. With the Indian government ramping up its military capabilities, the focus will likely remain on defence stocks in the coming weeks.
In summary, the current tensions between India and Pakistan have not only escalated military actions but have also significantly impacted the stock market, particularly within the defence sector. As the situation develops, analysts will be closely monitoring how these companies adapt to the challenges and opportunities presented by the ongoing conflict.
