Mazagon Dock to Cochin Shipyard: Defence stocks tumble up to 18% in 1 month. Buy the dip or stay cautious?

After powering India’s markets for much of 2025 on the back of robust order flows and the high-profile success of Operation Sindoor, defence stocks are now hitting turbulence. From Mazagon Dock to Cochin Shipyard, shares have dropped as much as 18% in the past month, dragging the Nifty India Defence index sharply lower and sparking concerns over overheated valuations, delivery delays and execution risks.

Once buoyed by geopolitical tailwinds and export optimism, the entire sector has turned red over the last four weeks. The Nifty India Defence index is down 11% since late June, with all 18 constituents slipping into negative territory. Garden Reach Shipbuilders fell 17.8%, Paras Defence lost 17.3%, Zen Technologies declined 16.6%, and Mazagon Dock dropped 14.3% in a month. Cochin Shipyard shares slipped 13.6%.

Bigger names such as Hindustan Aeronautics (HAL), BEML and Bharat Electronics (BEL) have also seen corrections between 6% and 8%.


Yet, year-to-date gains remain strong for many. Garden Reach is still up 52% in 2025, Paras Defence has climbed 34%, and BEL is 32% higher. Others like Zen Technologies and BEML, however, are underperforming, with Zen down 35% year to date.

Despite the recent slide, sector valuations remain elevated. The Nifty India Defence index currently trades at a price-to-earnings ratio of 54.5x, more than double the 21.8x multiple on the Nifty 50.

Q1 earnings spark reality check

The pullback gained momentum after recent earnings failed to meet market expectations.

Shares of Mazagon Dock Shipbuilders fell 5.2% on Tuesday, July 29, after the state-run defence firm reported a 35% year-on-year drop in consolidated net profit to Rs 452 crore for the June quarter. Zen Technologies saw a similar hit after posting a 56% plunge in revenue and a halving of profit to Rs 37.1 crore.

BEL, too, faced pressure despite posting a 25% rise in quarterly profit to Rs 969 crore. The stock declined as much as 3% after revenue came in below both internal and street estimates by 7–9%.

Confirmed downtrend?

Ajit Mishra, SVP, Research at Religare Broking, believes the sector’s technical signals are clearly bearish. “Yes, the Nifty India Defence Index has entered a confirmed short term downtrend,” he said. “This is evident from the series of lower highs and lower lows… the price has decisively broken below the 20-day and 50-day moving averages.”

Mishra pointed to key support around 7,600 and major support near 7,270, the level of the 200-day exponential moving average. “As of now, there are no clear signs of a near-term reversal… the slope of the short-term moving average is now turning downward, indicating bearish momentum,” Mishra said.

Kunal Kamble, Sr. Technical Research Analyst at Bonanza, sees the current decline as a technical correction within a larger uptrend. “Nifty Defence is currently riding its 4th wave, which is a corrective wave in the 5-wave impulse structure,” he said.

He noted that the index has bounced from its Potential Reversal Zone (PRZ) between 7,621 and 7,195 but cautioned that “it would be too early to call it a confirmed reversal.” For that, the index needs to move above 8,300.

Kamble added that the index is in oversold territory and “looks attractive at the current level for those with a higher risk appetite,” while more conservative investors should wait for a move above the 50-day EMA.

Execution risk takes centre stage

Fundamentally, analysts say the market is beginning to separate hype from delivery.

“The current correction in defence stocks appears primarily valuation-driven following unsustainable price levels, but execution concerns are adding pressure,” said Nitant Darekar, Research Analyst at Bonanza. “HAL’s inability to deliver Tejas Mark 1A fighter jets delayed due to GE F404 engine supplies indicates supply chain vulnerabilities.”

While the long-term growth story remains intact, underpinned by international demand for BrahMos missiles and Garuda drones—investors are now scrutinising execution timelines. “Execution delays could jeopardize India’s reputation as a reliable defence supplier,” Darekar said.

Putta Ravi Kumar, Analyst at Choice Institutional Equities, agrees the pullback is more than just a valuation reset. “Delays in the allocation of emergency procurement funds… have created uncertainty around near-term order visibility and execution timelines,” he said. “While robust order books indicate strong demand, markets are no longer rewarding order wins in isolation.”

Kumar said, “The Q1 earnings season acted as a reality check, separating narrative-driven momentum from operational delivery.”

Still, he sees selective opportunities. “Post the recent correction, we find the risk-reward particularly favourable in names like BEL and HAL,” Ravi Kumar said. “BEL continues to benefit from rising electronic warfare and radar system demand, while HAL stands out with its unmatched execution in indigenous platforms.”

Watch, wait, and choose wisely

While the broader outlook for India's defence sector remains promising, the current correction has reset investor expectations. As sentiment shifts from euphoria to scrutiny, analysts say investors must look beyond headlines and order books, and focus on companies with credible delivery, margin stability and supply chain control.

The rally that followed Operation Sindoor may have been driven by optimism. What comes next will likely be decided by execution.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)