Nifty Defence Index slips 2% from peak! Paras Defence, HAL, shipyard stocks drag; should you buy now?

Defence stocks saw a steep selloff on Tuesday, May 20, as the Nifty India Defence index fell more than 1.9 per cent intraday to trade at around 8,047.65. This is the second consecutive day of fall, prompted by forceful profit booking after a long record-breaking rally fed by ‘Operation Sindoor ‘-supported sentiment.

Leading the correction were shipyard and aerospace firms that had recently scaled fresh lifetime highs. Paras Defence, in particular, saw a nearly 5 per cent drop after its promoters offloaded a sizeable stake in large bulk deals.

Paras Defence Promoters Dump over 13 lakh shares

In a significant development, three Paras Defence and Space Technologies Ltd promoters sold 13.34 lakh shares, which represents about 3.3 per cent equity in the company. The deals involved:

• Sharad Virji Shah selling 9 lakh shares at Rs 1,682.87
• Anish Mehta selling 2.17 lakh shares at Rs 1,664.62
• Kaajal Harsh Bhansali selling 2.17 lakh shares at Rs 1,662.62

According to March 2025 shareholding information, Paras Defence promoters owned 57.05 per cent in the company, while the public owned 42.95 per cent.

Shipyard stocks plunge, pull down wider defence pack

Among other major losers:

• Cochin Shipyard fell more than 6 per cent to Rs 1,863.20
• BEML, GRSE, DCX India tumbled over 3 per cent
• Mazagon Dock, BDL, and HAL fell about 2 per cent
• Cyient DLM and Data Patterns also dipped almost 1 per cent

But BEL and Zen Technologies defied the trend, trading marginally higher on selective buying.

Profit booking after Operation Sindoor-fuelled euphoria

Defence stocks had risen for six consecutive sessions until May 16, sharply, following increased India-Pakistan border tensions in the wake of Operation Sindoor The aggregate market capitalisation of 18 listed defence companies had risen to Rs 11.23 lakh crore, an increase of more than 50 per cent from February’s Rs 6.95 lakh crore level.

Analysts’ Take 

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, warned investors of “One key trend in the market is the dramatic rally in defence stocks. Although this space has good medium to long-term opportunities, their valuations have gone overboard. A bit of profit booking in this space would be in order.”

What to do now?

Despite the long-term structural story of India’s defence industry remaining intact, experts recommend caution in the near term on account of stretched valuations and continuing promoter-level action.

Retail investors should wait for additional consolidation before entering the high-flying counters such as Paras Defence, Cochin Shipyard, and HAL.