Shares of Indian defence companies declined sharply in trade on July 14, as profit booking at elevated valuations led to continued weakness across the sector. The Nifty India Defence index slipped over 0.6% to around 8,457.70, marking its third consecutive session of losses.

After delivering stellar returns earlier this year on the back of geopolitical events like Operation Sindoor, rising tensions in Russia-Ukraine and Israel-Iran, the defence sector is now facing headwinds as global tensions ease and valuations appear stretched. Analysts had flagged concerns over lofty pricing, which are now materializing as investors lock in gains.

Among the top losers, Garden Reach Shipbuilders & Engineers (GRSE) fell nearly 4%, trading at ₹2,698. Fresh April–June quarter shareholding data pointed to reduced retail and mutual fund participation. Retail investors holding up to ₹2 lakh in value dropped to 3.97 lakh, down from 4.04 lakh in Q4FY24. Retail ownership slid from 16.72% to 14.89%, while mutual fund holdings fell to 1.4% from 1.64%. HDFC Mutual Fund, a key stakeholder last quarter, is no longer in the list, suggesting its stake dropped below the 1% disclosure threshold.

GRSE has now corrected over 12% in the past month, despite a staggering 88% rally over the previous six months, reflecting how quickly investor sentiment can reverse in high-beta sectors.

Other major defence stocks also fell:

Cochin Shipyard declined nearly 3%

Zen Technologies, Paras Defence, and Mazagon Dock Shipbuilders dropped over 2% each

Bharat Dynamics (BDL), manufacturer of Akash missiles, fell over 1%, while Bharat Electronics (BEL) traded in the red with minor losses

Adding to the pressure, a report from CNN Brazil stated that Brazil has halted its negotiations with India over the Akash missile system, shifting focus to a $920 million deal with European defence major MBDA for its EMADS platform. This potential lost export opportunity adds to the cautious outlook on the sector.

However, not all stocks followed the bearish trend. BEML and Astra Microwave posted gains of over 1%, while Data Patterns and Hindustan Aeronautics (HAL) traded slightly in the green, suggesting selective investor interest remains intact.

The recent drop signals a cooling-off phase for Indian defence stocks after a euphoric rally, with investors now becoming more valuation-sensitive as the global macro and order flow narratives stabilize.