The Israel-Iran conflict kept tensions high in the Middle East, and its impact on the stock market is becoming more visible now as Indian defence stocks rallied on Tuesday.
The fresh rally in defence stocks came as the tensions between the two countries entered the fifth day on Tuesday.
Earlier, US President Donald Trump indicated that America could also get involved in the Israel-Iran war, escalating the uncertainties around the conflict.
Geopolitical tensions push defence stocks higher
The Nifty India Defence Index surged 1.6% on Tuesday, with Mazagon Dock Shipbuilders leading the way with a 5% jump.
Indian government-owned Garden Reach Shipbuilders & Engineers Ltd (GRSE) gained 4% on Tuesday.
The stock has remained at all-time high levels, backed by a robust order book and improved expectations amid geopolitical tensions.
Other notable stock movements were witnessed around Data Patterns (India), which rose 3%.
BEML and Hindustan Aeronautics (HAL) jumped around 1% to 2% on Tuesday.
Volatility remains the battlefield
The rally in Indian defence stocks mirrors the trajectory of geopolitical tensions, which started with the Russia-Ukraine war in 2022.
The recent escalation of conflict between India and Pakistan, following ‘Operation Sindoor’, took defence stocks to their all-time highs as investors expected a rise in order volumes.
But, analysts have cautioned about the volatility around defence stocks as the valuations in many defence stocks are now stretched.
While speaking with Invezz, Investment research firm GoalFi’s founder, Robin Arya, spoke about the sector trading at lofty valuations, with many stocks priced at 40–60 times forward earnings.
He mentioned the robust domestic procurement pipeline but emphasised that future gains will depend on execution strength and order conversion.
“The Israel-Iran conflict has acted as a fresh catalyst for Indian defence stocks, with the Nifty Defence Index surging 18% in May alone and select names gaining over 30–40%. While valuations are steep, many trading at 40–60x forward earnings however they’re backed by a ₹16 lakh crore domestic procurement pipeline and a ₹3 lakh crore export target by 2029. The sector is in a structural uptrend, but future gains will depend on execution strength and order conversion,” Robin Arya said.
Sensex, Nifty trade in red amid geopolitical risks
As the Israel-Iran conflict entered its 5th day, the Indian stock markets continued to remain under pressure.
Benchmark indices Sensex and Nifty opened in the red on Tuesday and deepened their morning slump by midday, with the Sensex dropping 252.73 points (0.31%) to 81,543.42 and the Nifty sliding 91 points (0.36%) to 24,855.50.
Tata Motors, IndusInd Bank, Ultratech Cement, and Sun Pharma were among the top losers on the Sensex, while Kotak Bank, Axis Bank, NTPC, and Adani Ports led the gainers.
The losses reflected persistent selling pressure as investors remained cautious amid ongoing tensions and possible involvement of the United States in the conflict.
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