One year of Op Sindoor: Defence stocks surge amid geopolitical tensions

Defence stocks rally on geopolitical tensions and policy push, but analysts caution that near-term upside may be priced in despite strong long-term prospects

Defence stocks have gained over the past 12 months on the back of renewed interest in the sector following Operation Sindoor, as well as a broader rise in global geopolitical tensions. A universe of 18 defence stocks has posted an average year-on-year (Y-o-Y) gain of 67 per cent. Barring two, all of these stocks have delivered positive returns during this period.

 

The biggest gainer in the pack was MTAR Technologies, which rose 355 per cent, followed by Axiscades Technologies, up 172 per cent, and Apollo Microsystems, which gained 165 per cent. The combined market capitalisation of these 18 firms has increased by ₹2.3 trillion.

 

Operation Sindoor refers to the military strikes launched by India against targets in Pakistan and Pakistan-occupied Kashmir in the early hours of May 7, 2025. The strikes were carried out in response to the terror attack on civilians in Pahalgam, Jammu and Kashmir, on April 22, 2025.

 

Defence stocks have remained resilient even as Indian equity markets grappled with multiple headwinds, including a decline in corporate profits, turbulence arising from India-US tariff tensions, and the war in West Asia, which has unsettled oil prices. The Nifty India Defence index, a gauge of defence stocks, rose by 32 per cent, with the market capitalisation of its constituents increasing by ₹2.4 trillion over the last 12 months. During the same time, benchmark Nifty declined by 0.3 per cent, while Nifty Midcap 100 and Nifty Small Cap 100 rose by 13 per cent each. The rally has also been supported by ongoing global conflicts and tensions, including the prolonged Russia-Ukraine war, instability in West Asia, and rising strategic competition among major powers, all of which have driven higher defence spending worldwide.

 

Market experts said India’s defence industry is at an inflection point, transitioning from a largely import-dependent ecosystem to a more self-reliant and export-oriented model. This transformation is underpinned by strong policy support, rising budgetary allocations, and a sustained push for indigenisation. Increased participation from private players, alongside defence public sector undertakings (DPSUs), is strengthening competition, improving execution capabilities, and fostering innovation across the value chain.

 

“The global sentiment has been very supportive — ongoing geopolitical tensions across regions have led to a clear trend of higher defence spending worldwide, which naturally benefits the sector. Indian defence companies are now seeing rising global interest, with exports growing rapidly and opening up a new avenue beyond domestic demand,” said Siddhartha Khemka, head of research (wealth management), Motilal Oswal Financial Services.

 

Some analysts said much of the future growth may already be priced in. Going forward, if geopolitical tensions ease, defence stocks could underperform.

 

“For investors considering entry at current levels, it may be prudent to wait. More importantly, the focus should be on whether companies are effectively executing their order books — translating inflows into actual revenues and profits. Execution capability, not just order visibility, will be the key determinant of performance from here,” said Ambareesh Baliga, an independent equity analyst.

 

However, structurally, the outlook remains positive.

 

“This is a long-term, capital-intensive sector where growth plays out over years, not quarters. Over a 2-5-10 year horizon, the combination of indigenisation, strong order pipelines, and export potential suggests that the defence sector can continue to perform well, with new opportunities and segments emerging along the way,” Khemka added.