Bharat Dynamics, HAL, Mazagon Dock extend losses to third day amid profit booking; fall up to 4%

Defense stocks, including Bharat Dynamics, HAL, Mazagon Dock Shipbuilders, Bharat Electronics, Garden Reach Shipbuilders, and others, continued to witness selling pressure for the third straight session on Friday, July 18. In fact, the downtrend has persisted since the beginning of July.

The steady decline in these counters appears to be a reaction to profit-booking by investors, following a strong rally over the past four months that pushed valuations to unsustainable levels.

Among today's worst performers is Bharat Dynamics, which declined by 4% to ₹1,683 per share. This marks the seventh consecutive day of decline for the stock, leading to a 10% drop this week and a 20% decrease from its recent high.

Other notable losers include Data Patterns, Drone Acharya Aerial Innovations, ideaForge Technology, HAL, Sika Interplant Systems, Mazagon Dock Shipbuilders, Astra Microwave Products, Apollo Micro Systems, Bharat Electronics, and Paras Defence and Space Technologies, all of which declined between 1.5% and 3.5%.

Amid a sharp sell-off, the Nifty Defence index dropped 2% to hit a two-month low of 8,197 points and is on track to close the week in the red, after falling nearly 5% in the previous week.

Defense stocks had made a strong comeback in March, with momentum picking up in May following the launch of ‘Operation Sindoor,’ during which India showcased the strength of its indigenously developed defense systems and successfully intercepted drones and missiles launched by Pakistan.

The further rise in the tensions in the Middle East also supported the continued rally in these domestic-focused stocks. Additionally, strong March quarter earnings, rising order inflows, expectations of increased defense spending by the Indian government to further strengthen national security, and growing global demand for India’s indigenously manufactured defense products have all played a role in driving defense stocks to record highs.

This stellar performance also pushed the combined market capitalization of the 18 Nifty India Defence constituents past the ₹11 lakh crore mark for the first time, reaching ₹11.3 lakh crore.

Over the years, the Government of India (GoI) has implemented numerous policy initiatives with Atmanirbhar Bharat at its core to enhance domestic defense production capabilities, encourage investments, and expand exports.

As a result, defense procurement from domestic vendors has increased from 61% in FY2017 to about 75% in FY2025e, while exports have grown more than 15-fold, registering a healthy CAGR of 41% to reach ₹23,622 crore during the FY2017–FY2025e period, as per ICRA.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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