Defence Stocks Dive Despite Market Rally; Ideaforge and Garden Reach Lead Selloff

Mumbai, June 25, 2025 – Defence sector stocks witnessed another day of sharp declines on Wednesday, significantly underperforming broader market indices, even as the Sensex and Nifty traded in positive territory.

Ideaforge, Garden Reach Drag Sector Down

Ideaforge Technologies was among the worst-hit, tumbling 4.77% intraday. It was followed by Garden Reach Shipbuilders and Engineers, which saw a steep 5.53% drop. Paras Defence also fell sharply by 3.64%, underscoring the sector-wide selloff. In total, 16 out of 18 stocks in the Nifty India Defence index were in the red.

Nifty Defence Index Falls Over 2%

The Nifty India Defence index dropped 2.10%, sliding 186 points to 8672.60, making it the worst-performing sectoral index of the day, despite strong gains in the broader Nifty 50, up 0.78% simultaneously. The index has now retreated close to 5.7% from its 52-week high of 9195.15.

Ceasefire Developments Weigh on Sentiment

After the sign of a possible ceasefire between Iran and Israel, investors’ views turned sour, and they had low expectations concerning the near-future defense orders. The shift in geopolitics has resulted in selling and profit booking in shares that had rallied previously on conflict-related momentum.

Valuation Concerns Add to Pressure

Valuations remain a sticking point for many investors. Analysts have flagged that several Indian defence PSUs are trading at inflated valuations, with expectations of future order flows already priced in. This has led to increased scrutiny and selective exits from the sector.

Bright Spots: Dynamatic and Cyient DLM

While the broader defence pack slumped, Dynamatic Technologies bucked the trend, rising 2.64%, and Cyient DLM also gained 1.82%. However, these were the only two gainers out of 18 index constituents, highlighting the severity of the sectoral correction.

Outlook

The recent fall of the Nifty Defence index is a short-term correction, with the index continuing to rise by 22.99% against last year. Nonetheless, geopolitical cooling tensions and rebalancing valuation may still cause near-term turbulence.

Even though the rest of the market has been optimistic, the defense segment’s poor performance indicates the possibility of a reversal in growth expectations, especially given that investors are focusing on other, more stable, reasonably priced segments.

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