Indian defence stocks remained under pressure on Wednesday, extending their decline for a fifth consecutive session even as the broader equity market traded higher. The Nifty India Defence index fell 1.02 percent to 9,050.45 during mid morning trade.

At 10:32 am, the Sensex was trading 336 points, or 0.45 percent, higher at 74,340, while the Nifty 50 gained 110 points to 23,229. The relative weakness in defence stocks therefore stood out against the broader market recovery.

The latest decline has taken the Nifty India Defence index down around 9.7 percent over five sessions. The index had already declined 8.5 percent during the preceding four sessions. The current losing streak follows a strong rally that culminated on September 8, when the defence index gained 2.5 percent after the Defence Acquisition Council approved acquisition proposals worth around Rs 1.10 lakh crore for the Army, Navy and Air Force.

Selling on Wednesday was broad based across defence-related stocks. MTAR Technologies was the biggest decliner among the index constituents, falling 4.4 percent to Rs 6,639. Apollo Micro Systems declined 4.2 percent to Rs 370.35.

Solar Industries India fell 3.1 percent to Rs 18,655, while AxisCades Technologies declined 3.1 percent to Rs 1,663.90. Paras Defence and Space Technologies dropped 2.8 percent to Rs 1,302.10. Mishra Dhatu Nigam and Dynamatic Technologies also declined more than 2 percent each.

Among the larger defence companies, Hindustan Aeronautics declined 1.2 percent to Rs 4,637.90, Bharat Dynamics fell 1.3 percent to Rs 1,120.10 and Mazagon Dock Shipbuilders slipped 0.7 percent to Rs 2,221. Bharat Electronics moved against the broader trend with a 0.5 percent gain to Rs 384.90, while Astra Microwave Products rose 0.8 percent to Rs 1,606.90.

The selling pressure comes despite HSBC highlighting strong earnings visibility for the Indian defence sector, supported by a multi year increase in defence spending. According to the brokerage, domestic procurement and rising exports could support the sector's order cycle, particularly across defence electronics, aerospace, missiles, defence systems and unmanned systems.

HSBC initiated coverage on Hindustan Aeronautics and Bharat Electronics with Buy ratings. The brokerage initiated coverage on Bharat Dynamics, Astra Microwave Products, Data Patterns and Solar Industries with Hold ratings, while Mazagon Dock Shipbuilders was initiated with a Reduce rating.

Expectations of a strong domestic order pipeline were also supported by the latest Defence Acquisition Council approvals. Around 98 percent of the Rs 1.10 lakh crore acquisition proposals approved on September 7 were earmarked for Indian industry, covering equipment requirements across the Army, Navy and Air Force.

The recent decline therefore comes against a backdrop of positive long term sector fundamentals and increased domestic procurement expectations, while investors continue to reassess valuations and positioning following the defence sector's earlier rally.