The aftermath of Operation Sindoor has sent India’s defence sector stocks soaring, with shares of companies like HAL, BEL, BDL, and Ideaforge Technology rallying as much as 40 percent since May 8, 2025. This surge follows India’s strategic airstrikes on terror camps in Pakistan and Pakistan-occupied Kashmir in retaliation for the Pahalgam terror attack on April 22, which claimed 26 lives.
Operation Sindoor not only reinforced India’s military resolve but also showcased the effectiveness of indigenous defence systems, triggering investor confidence in domestic defence manufacturing capabilities. With the spotlight on India’s defence prowess, both institutional and retail investors are re-evaluating the long-term potential of the defence sector. However, with valuations running high, the key question remains—should investors still buy into this rally?
Why Defence Stocks Are Surging
India’s decisive military action under Operation Sindoor brought widespread recognition to the strength and precision of its indigenously developed defence technologies. Companies supplying equipment used during the operation, such as BDL’s missile systems, BEL’s radars, and HAL’s aircraft platforms, were thrust into the limelight.
According to market analysts, the rally is driven by a combination of strong Q4FY25 results, heightened geopolitical tensions, and the expectation of increased domestic and international orders. Defence analysts point out that India’s conflict with Pakistan has also signalled to global defence buyers the reliability and efficiency of Indian equipment.
As of May 16, stocks such as Ideaforge Technology, Mishra Dhatu Nigam, Zen Technologies, Data Patterns, BDL, BEL, BEML, Bharat Forge, and HAL have gained over 10 to 40 percent in less than ten days.
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Expert Views: What’s Driving the Optimism?
Ajit Mishra, SVP of Research at Religare Broking, attributes the momentum to government support and visibility in future defence earnings. He noted that investors are responding to the strong order books and policy tailwinds under the Make in India initiative, which align with strategic goals of self-reliance in defence.
Prashanth Tapse, Senior VP of Research at Mehta Equities, explained that the combination of operational success, strategic importance, and fiscal performance is rare. According to Tapse, many stocks are trading at elevated valuations—between 40x and 120x earnings—but those valuations may be justified given high earnings visibility, large defence budgets, and the government’s continued capital expenditure push.
The India-Pakistan border skirmishes have effectively become a live demonstration of India’s defence technology, attracting attention from foreign governments exploring new suppliers amid changing global alliances.
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Valuations: Are They Too High?
While sentiment remains bullish, concerns around stretched valuations are beginning to emerge. Defence stocks are no longer cheap, and some analysts suggest caution in entering at elevated price levels.
Ajit Mishra notes that India’s defence budget, currently 1.9 percent of GDP, is expected to increase due to ongoing security challenges. This supports structural tailwinds for the sector. However, he cautions that some consolidation or profit booking is likely, given the rapid price escalation.
Tapse agrees but emphasizes that long-term fundamentals remain intact. Many defence firms reported strong order inflows and earnings in Q4FY25, which justifies some of the rally. He expects a 12 to 15 percent CAGR for the Indian defence sector over the next five years, driven by exports, domestic procurement, and Make in India incentives.
Conclusion
The defence stocks rally post Operation Sindoor is not merely speculative; it is driven by real strategic, geopolitical, and economic factors. With India’s military asserting itself on the global stage and defence indigenization becoming a national priority, companies like HAL, BEL, and BDL are poised to benefit from long-term structural tailwinds.
However, investors should remain selective. While the growth story remains intact, the current valuations demand a disciplined entry strategy, with attention to both fundamentals and technicals. Defence stocks are transitioning from a tactical trade to a strategic long-term investment theme for the next decade.
For those willing to ride the volatility, focusing on high-quality names with proven earnings, robust order books, and policy tailwinds may offer both safety and upside in the long run.