The shares of India’s leading defence companies tumbled on August 8, dragging the Nifty India Defence index down nearly 2% to 7,662 by 2 PM. This marks the index’s third consecutive day of losses, driven by weak quarterly earnings, profit booking, and a lack of fresh sectoral triggers.

Defence stocks had been in the spotlight since May after the Indian military carried out targeted strikes in Pakistan and Pakistan-occupied Kashmir under Operation Sindoor. Heightened global conflicts — including the Russia-Ukraine war and Israel-Iran tensions — and NATO’s decision to ramp up defence spending had previously boosted sentiment, pushing the index up 42% since the end of 2024 to a record high in June.

However, as geopolitical tensions ease, the rally has cooled. Analysts warn that elevated valuations are now weighing on the sector, even as the long-term outlook remains positive.

Among key movers, Data Patterns plunged nearly 6% to ₹2,426 after reporting a 22% YoY and 75% QoQ drop in Q1 FY26 net profit to ₹25.5 crore. Revenue from operations also fell sharply by 75% sequentially to ₹99 crore. Mazagon Dock Shipbuilders slid almost 5% to ₹2,657 after posting a 35% YoY drop in Q1 net profit to ₹452 crore.

Other notable losers included DCX India, Paras Defence, and Bharat Dynamics (BDL), each down up to 4%, while Solar Industries, Cochin Shipyard, and Hindustan Aeronautics (HAL) slipped over 2%. Garden Reach Shipbuilders & Engineers (GRSE), BEML, and Bharat Electronics (BEL) also traded lower. GRSE reported Q1 FY26 net profit of ₹120 crore, up 38% YoY but down sharply from ₹244 crore in Q4 FY25.

Commenting on the trend, Bhavik Joshi, Business Head at INVasset PMS, said, “Indian defence stocks have entered a consolidation phase after a strong rally earlier this year. The recent pullback reflects profit booking and valuations moving ahead of fundamentals. The sector’s trajectory will likely balance near-term volatility with medium-term promise, making selectivity and disciplined entry points crucial.”