Profit-Taking Hits HAL, BDL, Data Patterns as Nifty Defence Index Falls Again

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Last Updated: 18th July 2025 - 06:03 pm

2 min read

In a notable shift, profit-taking has rattled India’s defence stocks for a third consecutive session as of July 18. Investors locked in gains after a prolonged rally fueled by geopolitical tensions and strong earnings. Prominent defence companies—including Hindustan Aeronautics Ltd (HAL) declined over 2.87% to 4,652.00, Bharat Dynamics Ltd (BDL) declined 4.18% to 1,670.00, and Data Patterns India declined 4.64% to 2,761.10. This sell-off dragged the Nifty India Defence Index down 2.3%, marking its third straight day of losses and accelerating a broader pattern of profit-induced corrections.

Earlier in the week, similar trends had emerged. On July 14, the Nifty Defence Index slipped over 0.6%, continuing its retreat as investors cashed out after a steep rally earlier this year. Stocks such as Garden Reach Shipbuilders & Engineers (GRSE), Cochin Shipyard, and BEML dropped between 2–4%, reflecting waning enthusiasm among retailers and institutions alike.

The initial surge in defence shares earlier this year was driven by geopolitical tensions, such as India’s cross-border strikes (“Operation Sindoor”) and global conflicts in Russia, Ukraine and Israel–Iran, as well as hopes of significant order inflows. However, as global hostilities eased and valuations climbed, analysts started to flag concerns. Brokers like Motilal Oswal downgraded stocks such as BDL to "Neutral," citing rich pricing and limited upside.

Valuation Worries Intensified 

The Nifty Defence Index now trades at roughly 60x earnings, well above historical averages. Despite robust fundamentals—marked by record-high defence spending and export growth—the elevated multiples prompted a natural recalibration.

Experts highlight that a 15–20% correction after strong rallies is healthy and likely a normal part of market cycles. They advise investors to view this as a pullback rather than a breakdown in fundamentals. 

Conclusion

Following explosive growth earlier this year, the Indian defence industry has entered a phase of consolidation. Despite good core fundamentals, defence stocks have declined for three days due to profit booking and valuation worries. For fresh impetus, investors seeking long-term structural opportunities should keep an eye on impending order pipelines and geopolitical events.

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