On May 9, 2025, Indian defence stocks surged significantly amid escalating tensions between India and Pakistan, following a series of military actions that have heightened investor interest in the sector. The stock market benchmark indices, Sensex and Nifty, faced a downturn, but defence-related stocks defied the trend, reflecting a growing confidence in the military sector.
The Indian Army reported that on the night of May 8-9, Pakistan's armed forces launched multiple drone attacks along the western border, which were successfully repulsed. This incident marked a continuation of the ongoing conflict, which has seen a rise in military engagements. In response, the Indian government has been ramping up its military capabilities, particularly in drone technology.
Investors responded positively to these developments, particularly following reports of India’s Operation Sindoor, which targeted and destroyed nine terror sites deep inside Pakistani territory. This operation, initiated on May 7, is considered one of the most significant military incursions since the 1971 war.
Shares of various defence companies saw substantial gains on May 9. For instance, ideaForge, a prominent drone manufacturer, saw its stock price soar over 17% during intraday trading, reflecting a broader trend towards military technology investments. Over the past week, ideaForge's shares have increased by more than 21%, indicating strong investor confidence in the potential for drone warfare.
Zen Technologies also experienced a notable rise, hitting a 5% upper circuit in intraday trading. Although the company has faced challenges this year, with its stock down 43% overall, its recent performance suggests a shift in market sentiment towards defence technologies.
Meanwhile, Paras Defence & Space Technologies saw its shares jump nearly 6%, continuing a strong upward trend that has seen the stock increase by 54% over the past month. This surge in stock prices reflects the growing focus on defence procurement and modernization efforts by the Indian government in light of current security challenges.
Hindustan Aeronautics (HAL), a long-standing player in the Indian defence industry, recorded a moderate 1.5% rise in its share price. The company has shown resilience with an 11% increase over the past month and nearly 17% over the past year. Bharat Electronics (BEL) also attracted attention, with a 2.5% uptick on May 9, contributing to a yearly performance gain of nearly 39%.
The Nifty India Defence index surged by nearly 2.4% or 164 points on the same day, indicating a strong sectoral performance despite broader market declines. The BSE Sensex dropped by over 813 points, while the NSE Nifty 50 index fell around 250 points, highlighting the contrasting fortunes of defence stocks against a backdrop of geopolitical tensions.
Market analysts suggest that the surge in defence stocks is driven by expectations of increased government spending in the sector. "Under normal circumstances, on a day like this, the market would have suffered deep cuts. But this is unlikely due to two reasons. One, the conflict, so far, has demonstrated India’s clear superiority in conventional warfare, and therefore, further escalation of the conflict will inflict huge damage to Pakistan. Two, the market is inherently resilient supported by global and domestic macros," said VK Vijayakumar, chief investment strategist at Geojit Investments.
Foreign institutional investors (FIIs) have continued their buying spree, indicating broader confidence in the Indian market despite the escalating tensions with Pakistan. Vijayakumar noted that a weak dollar and potentially weakening economies in the US and China are beneficial for the Indian market, further supported by high GDP growth expectations and a declining interest rate environment.
As the situation evolves, investors are advised to remain vigilant and not panic. "Investors should not panic and exit from the market now. Remain invested, monitor the developments, and wait for the dust to settle," Vijayakumar added.
Overall, the strong performance of defence stocks amid rising geopolitical tensions illustrates a significant shift in market focus towards national security and military capabilities. With the Indian government likely to increase defence spending in response to these challenges, the outlook for defence-related companies remains positive.
As the situation between India and Pakistan continues to develop, the implications for the stock market and broader economy will be closely monitored by analysts and investors alike. The resilience of defence stocks in the face of adversity highlights their strategic importance and the growing recognition of the role of advanced military technologies in modern warfare.
