Israel-Iran ceasefire halts defence stocks rally; HAL, GRSE, ideaForge, Paras Defence, BEML fall by up to 10%

Ending a two-session-long gaining streak, shares of defence companies saw selling across counters, in an otherwise positive broader market, amid profit booking at higher levels. Investors booked profit after Israel and Iran agreed to a ceasefire, following 12 days of intense conflict.

The Nifty India Defence index, which tracks the performance of listed defence stocks, was down 2.5%, with 16 of the 18 constituents trading in the red zone. Cyient DLM and Solar Industries India were the outliers.

The Top 5 losers on the Nifty Defence index were Garden Reach Shipbuilders & Engineers (GRSE), BEML , Mishra Dhatu Nigam limited (Midhani) , Astra Microwave Products , and Paras Defence & Space Technologies, falling in the range of 10-5%.

The index heavyweights— Hindustan Aeronautics (HAL) , Bharat Dynamics (BDL) , and Bharat Electronics (BEL) —declined by up to 4%. Among others, Zen Technologies, Unimech Aerospace and Manufacturing, Data Patterns, ideaForge Technology, and Dynamatic Technologies were notable losers.

On the other hand, shares of Cyient DLM and Solar Industries India were trading marginally higher.

Meanwhile, the domestic benchmark indices, the BSE Sensex and the NSE Nifty, witnessed strong buying on Tuesday, rising by up to 1%, amid an ease in geopolitical tensions. At the time of reporting, the 30-share Sensex was trading 166 points higher at 82,065 and the Nifty50 was up 73 points at 25,048.

Earlier today, U.S. President Donald Trump had claimed that Israel and Iran have fully agreed to a “complete and total” ceasefire after the two countries asked him simultaneously for “peace”.

According to V.K. Vijayakumar, Chief Investment Strategist, Geojit Investments, the dramatic developments in the Middle East, culminating in Trump’s announcement of a ceasefire, indicates that the worst of the conflict is over. The sharp reactions in the crude oil and stock markets suggest the geopolitical situation limping back to normal.

 “Investors can focus on reasonably valued domestic cyclicals like financials, aviation, telecom and capital goods where safety is higher," he said.

Defence stocks rally around 45% in three months

Since April this year, the defence sector has rallied approximately 45.43%, significantly outperforming the Nifty50, which has gained only around 9% during the period. “This clear outperformance was fuelled initially by the India-Pakistan conflict, followed by strong expectations that the upcoming Budget will include a record-high allocation to the defence segment—leading to sentiment-driven buying across the sector,” said Kunal Kamble, Sr. Technical Research Analyst at Bonanza Portfolio, a financial services company.

Despite the strong uptrend, the sector appears to be showing signs of exhaustion, with the Nifty Defence Index correcting 2.4% to 8,859.60 . “A close below 8,886 would result in a bearish engulfing pattern on the daily chart, while on shorter time frames, a double top formation is developing. Additionally, the RSI is showing divergence with price action, which typically suggests a possible pause in the current uptrend or a near-term retracement,” Kamble said.

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