Defence stocks buck market rally: BEL, Solar Industries, Data Patterns slip; Nifty India Defence down 2%

Defence stocks like Bharat Electronics (BEL), Cochin Shipyard, Solar Industries, and Data Patterns India dragged down the sectoral benchmark index, Nifty India Defence by 2.2% on Tuesday, July 7, as market investors focused on profit booking cues after Monday’s rally.

On Tuesday, investors were also focusing on India's BrahMos missile deal with Indonesia post the rally on July 6 which was fuelled by the Indian Defence Acquisition Council (DAC) agreeing for capital acquisition proposals worth ₹52,000 crore.

NSE data showed that the Nifty India Defence index dropped 2.2% to its intraday low of 9,427.95 points on Tuesday, compared to 9,641.30 points at the previous stock market close.

Why did defence stocks fall today?

Defence stocks dropped on Tuesday’s market as stock market investors book their profit after the sectoral rally on July 6. This comes after the defence stocks rallied on Monday’s markets as investors reacted to the Defence Acquisition Council (DAC) approving capital acquisition proposals worth ₹52,000 crore.

DAC’s move to approve capital acquisition proposals aims to procure a wide range of weapons systems and platforms while enhancing the operational capabilities of the Indian armed forces.

This approval will help Indian armed forces secure next-generation air defence systems, anti-tank guided missiles, anti-drone electronic warfare systems, loitering munitions, naval unmanned aerial systems, and high-altitude surveillance platforms, a move beneficial for defence equipment makers.

The defence index was witnessing further downward pressure on Tuesday, as Cochin Shipyard opened its offer for sale (OFS) where the government of India sold up to 4% stake in the company.

The OFS issue has a floor price of ₹1,400 per share, which is at a discount from the current market price, triggering a selling sentiment on the stock market to adjust to the new floor price update.

The market investors were also focused on the talks between Prime Minister Narendra Modi and Indonesian President Prabowo Subianto as the two sides agreed that India will supply the BrahMos missiles to the Indonesian military.

According to a PTI report, both the countries agreed to several agreements which aim to boost critical minerals, technology, food security, medicines and maritime security aspects between India and Indonesia.

Top defence stock movers today

*Note: All data related to the current market price, intraday returns, YTD returns, and 1-year returns have been collected from the NSE website.

How have Nifty India Defence performed?

The sectoral benchmark index, Nifty India Defence, has delivered more than 7% returns to investors in the last one year period, according to NSE data.

The data further showed that since the past year and on a year-to-date (YTD) basis, the defence stocks have outperformed the benchmark NIFTY50 returns. The exchange data further showed that the defence stocks have gained 22% YTD, and is up 21% in the last three months.

Although in the last one month period, the defence index has gained 4.5%, the Nifty India Defence was trading 0.39% in the last five trading sessions on the Indian stock market.