On Thursday, Indian defence stocks experienced a significant decline, with shares dropping up to 6% as investors engaged in profit booking following a strong rally. The Nifty India Defence index fell approximately 3%, mirroring broader market trends where the Sensex plummeted by 1,400 points, erasing over ₹9 lakh crore from the market capitalisation of BSE-listed companies. Among the stocks affected, Garden Reach Shipbuilders & Engineers (GRSE) saw a 6% drop, trading at ₹2,209 per share, while Cochin Shipyard and Mazagon Dock Shipbuilders fell around 5% each.

The decline follows a remarkable surge in defence shares, particularly after GRSE announced its highest-ever annual turnover of ₹6,400 crore for the financial year 2026, marking a 26% increase from the previous year. Analysts from Motilal Oswal Financial Services highlighted the potential for growth in the sector, driven by recent approvals from India's Defence Acquisition Council (DAC) for proposals worth ₹2.38 lakh crore. These approvals are expected to enhance the capabilities of the Indian military and create a strong market for domestic defence manufacturers.

Despite the recent downturn, analysts maintain a positive outlook, emphasizing that defence companies have robust order books and can benefit from both domestic and export opportunities. They recommend stocks like Bharat Electronics (BEL) and Hindustan Aeronautics (HAL), with target prices set at ₹520 and ₹5,500 respectively.