Leading the pack was Mazagon Dock Shipbuilders, which jumped more than 5 per cent, followed by Garden Reach Shipbuilders & Engineers (GRSE), up over 4 per cent. Data Patterns rose more than 3 per cent, while Bharat Dynamics, Cochin Shipyard, Solar Industries, BEML, and Hindustan Aeronautics (HAL) gained between 1 and 2 per cent.

In contrast, Zen Technologies, Mishra Dhatu Nigam, and Astra Microwave Products traded marginally lower, bucking the overall trend.

The latest surge builds on strong momentum from May, when defence stocks rallied following India’s airstrikes on terrorist bases in Pakistan under Operation Sindoor. While those tensions have cooled, the ongoing Russia-Ukraine war and now the Iran-Israel crisis continue to feed bullish sentiment across defence counters.

According to analysts, the sector has also been buoyed by the Indian government’s focus on defence indigenisation and export growth. India aims to achieve Rs 25,000 crore in defence exports by FY26, with spending expected to rise from 2 per cent to up to 4 per cent of GDP over the coming decade.

Defence stocks have delivered robust earnings in recent quarters. In FY25, the sector reported a compounded annual growth rate (CAGR) of 55 per cent in market capitalisation from FY19, while aggregate PAT grew at 23 per cent CAGR. EBITDA margins improved in the March quarter on the back of better execution and cost efficiency.

“The sector’s long-term fundamentals remain strong, especially for export-linked players like HAL and Solar Industries,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Despite the strong performance, experts caution investors about frothy valuations. “Most defence PSUs are currently pricing in a lot of future optimism,” said Avinash Gorakshakar of Profitmart Securities. “Since the government is both the owner and the largest client, profit upside could be limited. Investors should accumulate these stocks gradually with a minimum two-year horizon.”

Analysts suggest focusing on fundamentally strong companies with a proven export track record. “Stocks like HAL, BEL, and Solar Industries are better placed given their order books and export potential,” said Sankhanath Bandyopadhyay of Infomerics. “But don’t chase rallies—evaluate balance sheets, dividend history, and global linkages before committing capital.”