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Defence stocks saw sharp selling pressure as investors booked profit after last week's good run. The Nifty India Defence index fell 1.45 per cent to 8,874.90 with significant contribution from names like Paras Defence and Space Technologies, Garden Reach Shipbuilders & Engineers (GRSE), Bharat Electronics (BEL) and Bharat Dynamics (BDL). 

Paras Defence and Space Technologies was the worst performer on the index, falling 7.8 per cent to Rs 920. The stock has taken a beating after a large rally post the government's mega defence acquisition announcement. The stock gained a lot last week, and now it is profit-booking at higher levels.

Apart from Paras Defence, several other defence PSU and private stocks also slipped:

GRSE fell nearly 2 per cent

BEL dropped around 1.6 per cent

BDL declined by 1.5 per cent

Astra Microwave Products and Zen Technologies too saw mild declines

The correction is being seen as a technical breather after last week's sharp gains.

On the other hand, DCX Systems, Unimech Aerospace, BEML, HAL (Hindustan Aeronautics), and Cyient DLM managed to remain in the green, providing some support to the index. HAL, which is a heavyweight in the defence space, saw mild gains on continued institutional buying.

The correction comes amid:

Profit booking after a massive rally last week

Easing geopolitical tensions in the Middle East

Lack of fresh triggers post the DAC announcement

Experts indicate that the Israeli Prime Minister Benjamin Netanyahu's optimistic remarks on a Gaza ceasefire deal and US ex-President Donald Trump's comments on a likely agreement this week have contributed to cooling risk sentiment, impacting defence counters globally.

Last week, defence stocks had surged after the Defence Acquisition Council (DAC) cleared 10 capital acquisition proposals worth Rs 1.05 lakh crore. The proposals focused on indigenous procurement, benefiting Indian defence companies. Stocks such as Paras Defence, GRSE, BEL, and BDL had rallied significantly following this announcement.

Despite today's correction, analysts remain bullish on the sector’s long-term prospects. The government’s continued push for Atmanirbhar Bharat in defence manufacturing, sustained order flow, and rising exports are expected to support sectoral growth.

However, experts advise short-term caution, especially in counters that have rallied sharply in recent weeks.

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