Defence stocks dip up to 6% despite Operation Sindoor as investors eye valuations, risks

On May 7, Indian defence stocks saw notable declines despite the country’s largest cross-border strike since 1971 under "Operation Sindoor." Companies like Hindustan Aeronautics (HAL), Bharat Dynamics, and Mazagon Dock Shipbuilders dropped by up to 6% as markets weighed geopolitical risks and stretched valuations.

Market analysts noted that defence sector stocks had rallied in recent sessions, especially after the Pahalgam terror attack that claimed 26 lives. The latest strike, targeting nine terror-linked sites in Pakistan and PoK, prompted many investors to book profits or adopt a cautious stance amidst global uncertainty.

The Nifty Defence index fell nearly 2%, dragged down by major shipbuilding firms and ordnance suppliers. Experts highlighted that while the order books of defence companies remain robust, especially after Operation Sindoor, market participants are now focusing on execution timelines and delivery capabilities over the next few quarters.

Strategists believe the strikes’ precision and non-escalatory nature helped buffer the broader stock market. Benchmark indices like Sensex and Nifty remained range-bound, while Pakistan’s KSE-30 dropped over 6% before a mild recovery. The Indian rupee opened slightly weaker but was largely stable.

Long-term optimism remains for the sector, with increased government focus on indigenised military logistics, cyber security, and strategic minerals. However, experts advise investors to be selective and valuation-conscious, even in a defence-dominant investment environment.