Defence stocks surge: Mazagon Dock shares up 35% YTD as Rafale-M deal, Kashmir tensions fuel sector rally

Shares of Mazagon Dock Shipbuilders Ltd. rallied 8.49% on Tuesday to hit a fresh 4 month-high of ₹3,022.90 on the NSE, extending gains for the second straight session. The stock opened at ₹2,817.90 and is currently trading at ₹3,007.50, up 7.94% from its previous close of ₹2,786.30, buoyed by strong buying interest. The stock has risen over 35% this year. The defence PSU now commands a market capitalisation of ₹1.21 lakh crore.

In the broader market, several defence-related companies posted strong intraday gains today. Hindustan Aeronautics Ltd (HAL) rose 5.25%, while Paras Defence and Space Technologies surged 13%. Garden Reach Shipbuilders and Engineers jumped 15%, Data Patterns (India) Ltd climbed 12%, Cochin Shipyard Ltd added 11%, and Bharat Dynamics gained 4.7%. The sharp uptick reflects renewed institutional interest in defence PSUs amid growing confidence in the sector’s long-term prospects.

For the last two days, defence stocks have surged sharply, as investor sentiment was buoyed by rising regional tensions and optimism around a major defence deal.

The rally gained momentum after the Indian Navy signed a ₹63,000-crore agreement with France's Dassault Aviation for the procurement of 26 Rafale-M fighter jets. The deal includes 22 single-seater jets and four twin-seater trainers, with deliveries expected to begin by 2031. Seen as a strategic upgrade to India’s naval air power, the development has energized buying across defence counters.

Market participants attribute the rally to multiple tailwinds—heightened focus on naval modernization, robust order books driven by the Indian Navy and export contracts, and expectations of new shipbuilding and submarine deals in FY26.

The security landscape in Jammu and Kashmir has grown increasingly tense following a deadly terrorist attack in Pahalgam on April 22, which claimed the lives of 26 individuals, including 25 tourists and one local resident. In response, the Indian government has announced a series of strong retaliatory measures aimed at isolating Pakistan diplomatically and economically. These include the suspension of the Indus Water Treaty, closure of the Attari-Wagah border crossing, restrictions on SAARC visas for Pakistani nationals, and the expulsion of Pakistani military advisors.

The heightened tensions have added a fresh layer of urgency to India’s defence preparedness, further energising activity in defence-linked stocks. As the situation develops, Defence Minister Rajnath Singh is expected to brief Prime Minister Narendra Modi today on the latest security assessments and policy responses.