Nifty India Defence index down 2%; what's dragging defence stocks today?

Don't want to miss the best from Business Standard?

Defence stocks fall today: Defence stocks came under broad pressure on Wednesday, December 3, with 16 out of the 18 constituents of the Nifty India Defence index trading in the red. 

 

The Nifty India Defence index slipped as much as 1.76 per cent to an intraday low of 7,814.60, and was down 1.71 per cent at 7,819.25 around 11:30 AM. In comparison, the benchmark Nifty50 was down 0.51 per cent at 25,898.85.

 

Across the board, defence heavyweights and mid-tier names saw declines. Bharat Forge fell 2.56 per cent to ₹1,385, Astra Microwave slipped 2.29 per cent to ₹905, Bharat Dynamics shed 2.24 per cent to ₹1,491.10, MIDHANI dropped 2.27 per cent to ₹313.50, and Solar Industries was down 1.94 per cent at ₹13,048. BEL lost 1.82 per cent to ₹405.50, Paras Defence declined 1.8 per cent to ₹693.50, Cochin Shipyard was lower by 1.6 per cent at ₹1,613.30, whilex' Dynamatic Technologies dipped 2.08 per cent to ₹8,881.

 

Selling pressure extended to other names as well. Zen Technologies was down 1.45 per cent at ₹1,372, GRSE declined 1.76 per cent to ₹2,562.30, Data Patterns fell 1.38 per cent to ₹2,855, Mazagon Dock eased 1.17 per cent to ₹2,620, BEML dropped 1.05 per cent to ₹1,774, HAL slipped 1.01 per cent to ₹4,462.80, and MTAR Technologies was marginally lower by 0.39 per cent at ₹2,517.70.

 

Meanwhile, only Unimech Aerospace and Cyient DLM managed to hold marginal gains in an otherwise weak session for the sector.

 

Market experts attributed the weakness to a combination of valuation concerns, liquidity pressures and profit booking. 

 

According to Chokkalingam G, founder and head of research at Equinomics Research, the broader pressure stems from ongoing liquidity constraints in the smallcap and midcap segments, along with the fact that many defence stocks had been trading at stretched valuations. He added that the current decline may also be driven by partial profit booking after a strong rally in recent months.

 

Ravi Singh, chief research officer at MasterTrust, shared similar views, saying defence stocks came under selling pressure today as the broader market turned cautious and investors chose to lock in profits after a strong recent run. He added that with global cues turning jittery and bond yields firming up, there was a visible shift away from high-momentum sectors. Singh noted that many defence stocks had rallied sharply over the past few months, and today’s decline appears to be “more of a healthy pullback rather than a change in the larger trend.”

 

The recent trend also reflects broader underperformance. The Nifty India Defence index has declined 2.68 per cent over the past month and has slipped more than 9 per cent in the last six months, sharply lagging the Nifty50, which is up 6 per cent during the same period.  CATCH STOCK MARKET LIVE UPDATES TODAY

Defence stocks: Investment strategy

 

Despite the near-term pressure, analysts maintain a constructive long-term view. Singh said, “Over the long run, the outlook for the defence sector remains positive, supported by rising government spending, a steady pipeline of orders and improving export prospects.” 

 

However, he cautioned that the short term may face some challenges due to “price and volume distribution over technical charts where the important level of 8,000 is already taken and price continues to trade below the key mark.” He suggested that long-term investors could consider using dips to add underperformers, while short-term traders may prefer to wait for clearer stability before taking fresh positions.

 

Chokkalingam, meanwhile, recommended a more conservative approach in the current environment. He said one can focus on largecap stocks in most themes including defence, and suggested that “one can consider largecap stocks like HAL instead of focusing on small and midcap stocks.”