Why Defence Stocks Are Falling

Indian markets declined on 18 July, 2025, fuelled by uncertainty around US-India trade talks.

At the time of writing, the BSE Sensex fell by 422 points to 81,836 points. The NSE Nifty was down 150 points at 24,961 points. Axis Bank was the top loser from the NSE Nifty falling 4% after disappointing Q1 FY2026 numbers.

One set of stocks that have been dropping in the last few days are defence stocks.

Let's explore what's fuelling the sharp fall.

#1 High Valuation Concern

The first reason is valuation concern.

Investors have been cautioning against the valuation in the defence space, following a sharp rally since April, 2025.

Defence stocks earlier surged this year due to tensions, such as India's military action against terrorist outfits and the Iran-Israel war. However, as tensions eased, defence stocks have fallen.

#2 Mutual Fund Pull Out

The second reason is mutual fund pull out.

Mutual funds have offloaded heavily in shares from 9 key defence stocks due to concerns over high valuations and operational issues, triggering a sell-off that led to the sector's decline.

In June 2025, mutual funds sold Rs 17 bn worth of shares in 9 defence companies. Solar Industries saw the biggest sell-off at Rs 9.5 bn, followed by Zen Technologies and Bharat Forge. Other major sales included GRSE, Cochin Shipyard, and Mazagaon Dock.

The defence sector index has now fallen nearly 7% since 9 July, 2025. Major stocks like GRSE, Cochin Shipyard, Astra Microwave and Solar Industries have dropped sharply.

What's Next for Defence Stocks?

Moving forward, the Indian Defence Acquisition Council recently approved procurement deals worth Rs 540 bn, adding to the Rs 2,200 bn worth of approvals already made in FY25.

The government has speeded up military procurement from 2 years to 6 months, boosting domestic defence makers like HAL, BEL, and Paras Defence. This move, benefits companies with strong orders and clearer revenue prospects.

India's defence sector is transforming with new policies, tech, advancements and self-reliance initiatives. With more private involvement and growing exports, it aims to become a global leader in defence manufacturing by 2047.

The Indian government's "Aatmanirbhar Bharat" initiative also encourages indigenous defence production to reduce import dependence.

It aims for India's defence sector to lead in innovation, self-reliance and global excellence. It brings together industry, government, and academia to create a strong, globally competitive defence industry that will make India a powerful nation.

India faces security threats, making military modernisation crucial. This has increased demand for advanced tech, surveillance, and modern weapons. Domestic defence firms are thus benefiting.

How Indian Defence Stocks Have Performed Today?

Take a look at how defence stocks have done today.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...