Defence stocks witnessed broad-based selling pressure on Monday afternoon as PM Modi and Indonesian President Prabowo Subianto agreed to deepen defence cooperation, with the proposed supply of BrahMos supersonic cruise missiles and Astra air-to-air missiles emerging as one of the key outcomes of their bilateral talks in Jakarta. During their meeting on Tuesday, the two leaders discussed expanding defence ties, including the supply of BrahMos and Astra missiles to Indonesia as part of efforts to strengthen maritime security in the Indo-Pacific region. Alongside defence cooperation, both countries signed nearly a dozen agreements covering critical minerals, technology, food security, pharmaceuticals and maritime collaboration. The development has put defence stocks back in focus after the initial rally following the Defence Acquisition Council's approval of ₹52,000 crore worth of defence proposals.
The Defence Acquisition Council approved procurement proposals covering a wide range of acquisitions aimed at strengthening the capabilities of the Army, Navy and Air Force in areas such as air defence systems, anti-drone capabilities, surveillance platforms and next-generation military technologies. For the Indian Army, the DAC cleared the procurement of the Anti-Unmanned Aerial Vehicle Electronic Warfare System 'AKASH TARANG', Man-Portable Anti-Tank Guided Missile (MPATGM) systems, the Medium-Range Surface-to-Air Missile (MRSAM) weapon systems, Very Short-Range Air Defence Systems (V-SHORADS), Active Protection Systems for tanks and jet-based kamikaze drone systems. The Navy received approval for the procurement of Multi-Influence Ground Mines (MIGM), Naval Shipborne Unmanned Aerial Systems (NSUAS) and the establishment of a Land-Based Testing Facility (LBTF) for electric propulsion systems. For the Air Force, the council approved the acquisition of Fixed-Wing-Based High-Altitude Pseudo Satellites (FW-HAPS), along with other proposals to strengthen intelligence, surveillance, reconnaissance and communication capabilities. According to the Defence Ministry, the mine systems would help restrict adversary movement, while the unmanned aerial systems would improve maritime situational awareness through advanced sensor capabilities.
Defence stocks witnessed broad-based selling pressure on Monday afternoon, with the Nifty India Defence Index trading lower despite gains in a handful of constituents. At 2:54 PM, the sectoral index was down 135.35 points, or 1.40%, at 9,505.95, compared with the previous close of 9,641.30. During the session, the index opened at 9,625.40, touched an intraday high of 9,646.05, and slipped to a low of 9,427.95. Market breadth within the index remained weak, with 2 stocks advancing, 17 declining, and none remaining unchanged, reflecting continued profit booking across defence counters. The sectoral decline came as investors focused on the impact of PM Modi's Indonesia missile deal, with the market rally on July 6 being fuelled by the Indian Defence Acquisition Council (DAC) agreeing for capital acquisition proposals worth ₹52,000 crore.
Apollo Micro Systems emerged as one of the worst performers, declining 5.44%, or ₹23.05, to ₹400.80 at 2:54 PM. The stock opened at ₹427.00, touched an intraday high of ₹430.40, and fell to a low of ₹397.10, compared with the previous close of ₹423.85. Cochin Shipyard also traded under pressure, falling 3.03%, or ₹45.60, to ₹1,460.80. It opened at ₹1,451.20, hit a high of ₹1,467.90, and touched a low of ₹1,437.50 against the previous close of ₹1,506.40. Data Patterns (India) shares were under selling pressure, declining 4.34%, or ₹200.50, to ₹4,415.00. The stock opened at ₹4,620.00, hit an intraday high of ₹4,640.20, and slipped to ₹4,380.00 during the day. Paras Defence and Space Technologies shares declined 4.20%, or ₹57.10, to ₹1,301.30. The stock opened at ₹1,360.00, reached a high of ₹1,370.60, and dropped to an intraday low of ₹1,291.00. BEL traded marginally lower, slipping 1.05%, or ₹4.45, to ₹421.10. It opened at ₹425.55, touched a high of ₹425.90, and fell to ₹418.75. Mazagon Dock remained in negative territory, declining 1.07%, or ₹27.60, to ₹2,546.30.
According to Choice Institutional Equities, Q1FY27 is likely to be a seasonally soft quarter for the Indian defence sector, with revenue recognition expected to remain back-ended towards the second half of the financial year, particularly the fourth quarter. The brokerage noted that the key challenge continues to be the gap between strong order inflows and revenue conversion, resulting in delayed earnings translation despite a robust demand environment. It added that near-term revenue visibility remains constrained by execution bottlenecks, including delayed clearances, milestone-based billing and supply chain dependencies, rather than any weakness in demand. Most companies have entered FY27 with robust order backlogs and improving production readiness, indicating that the timing of execution remains the primary challenge. Choice Institutional Equities expects meaningful divergence in Q1FY27 performance depending on programme-specific execution timelines, with Q1FY27 expected to be a transitional quarter where reported earnings may remain subdued but underlying execution momentum is gradually building.
Following the Defence Acquisition Council's approval of ₹52,000 crore worth of defence proposals, brokerages emphasized the strategic shift towards technology-intensive systems. As per ICICI Securities, the approvals, such as Kamikaze loitering munitions, unmanned systems, anti-protection systems, anti-drone Electronic Warfare system, and HAPS represent a fundamental pivot towards technology-intensive systems from conventional, large-scale hardware platforms. The brokerage noted that BDL is the primary production partner for missile systems MP-ATGM and MR-SAM, along with Bharat Electronics (BEL) being the supplier of key electronic items. For the anti-drone EW system, BEL is likely to be the prime contractor or system integrator while Zen Technologies is expected to be the supplier of signal processing and jamming/spoofing components. In the case of Jet based Kamikaze drones, various private players are expected to participate in the request for proposals (RFP), with Solar Industries (in partnership with CSIR-NAL) and Zen Technologies also in process of developing these kamikaze drones. For NSUAS, various companies will participate including Adani, JSW, VEM, Ideaforge and others.
