BEL, HAL, Data Patterns, Mazagon Dock, Cochin, GRSE Shares; Bulls/Bears! Are Defence Stocks Worth Investing?

Defence stocks are witnessing a mixed reaction from investors this week. On June 26, defence giants like BEL, HAL, Bharat Dynamics, and Data Patterns rose, while PSUs like GRSE, Mazagon Dock and Cochin stocks fell sharply on BSE. Despite the latest correction, defence stocks have given double-digit returns year-to-date, in the range of 4% to 80%. As per experts, investing in defence stocks demands patience!

Defence Stocks On June 26:

On Thursday, the trend in defence stocks was mixed as the geopolitical tensions eased in the Middle East after Iran and Israel agreed to a ceasefire. It's the third day since Iran-Israel's 12-day war ended. In general terms, sentiments in defence stocks are high during war-like situations and geopolitical risks. Many defence stocks touched new highs last month due to India's Operation Sindoor against Pakistan.

At the time of writing, on BSE, Bharat Electronics (BEL), Bharat Forge, and Astra Microwave shares climbed by more than 1% each. While marginal upside was recorded in Bharat Dynamics (BDL) and Hindustan Aeronautics (HAL). Furthermore, stocks like Swan Defence & Heavy outperformed with 5% upside, followed by 2% gains in Paras Defence and 3% surge in Data Patterns.

However, stocks like Mazagon Dock plunged the most by nearly 3%, followed by decline of 1% to 2% in Cochin Shipyard and Garden Reach Shipbuilders & Engineers (GRSE).

"The recent correction in defence stocks triggered by easing Middle East tensions reveals a deeper, often ignored truth. This sector's performance is as much about market psychology as it is about fundamentals," said Tarun Singh, MD and Founder, Highbrow Securities.

Are Defence Stocks Worth Buying In Current Scenario?

Explaining in detail, Singh said, while emergency orders and conflict-driven demand can spark rapid rallies, they also inflate valuations beyond sustainable levels, leaving stocks vulnerable to sudden downturns when headlines shift. Investors are realizing that defence stocks aren't just a straightforward play on India's Atmanirbhar Bharat push; they're also a high-beta trade on global instability.

He added, "The sharp sell-off indicates a market reassessing whether these stocks are truly priced for long-term growth or merely riding a wave of speculative fervor. This volatility underscores the sector's dual nature; a mix of structural promise and short-term unpredictability."

Yet, for discerning investors, Singh said, this turbulence opens a strategic window. The long-term case for defence remains robust, fueled by rising domestic procurement, modernization budgets, and India's ambitions to become a defence export hub. Companies with strong execution capabilities, like Data Patterns, could emerge stronger post-correction.

However, given the sector's sensitivity to geopolitical shocks and policy delays, a selective approach is crucial. Adding Singh said, "Diversification into more stable sectors may help balance risk, while staggered accumulation in high-quality defence names could capitalize on irrational sell-offs. The key takeaway? Defence investing demands patience, a stomach for volatility, and a clear-eyed view of what's priced in; beyond the hype of war and peace cycles."

The recent pullback serves as a timely reminder that sustainable returns come not from chasing momentum, but from disciplined valuation and a clear-eyed view of long-term fundamentals, lastly Singh added.

Top Bulls And Bears In Defence Stocks YTD:

Despite latest correction, both defence PSUs and private defence stocks have recorded strong buying sentiment in YTD performance. Large-caps like HAL, BEL and BDL have surged by 15%, 40% and 61% so far in 2025.

Stocks like GRSE outperformed with nearly 79% YTD, followed by Paras Defence that gained over 61%. Additionally, stocks like Cochin Shipyard, Mazagaon Dock and Astra Microwave are up by 34% to 39%.

During Union Budget 2025, the Finance Ministry announced an outlay of Rs. 6,81,000 lakh crore (US$ 78.7 billion), which is higher by 9.5% over the Budget of 2024-25.

According to the Global Power Index, the Indian defence sector ranks fourth in terms of firepower with a score of 0.0979 (with 0.0 being the perfect score). The government has set a target of achieving defence manufacturing worth Rs. 3,00,000 lakh crore (US$ 34.7 billion), by FY29, cited by IBEF.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.