Defence Stocks Like HAL, Bharat Dynamics, Mazagon Dock Stay Flat Despite India-Pakistan Conflict Post Operation Sindoor

Defence Stocks: HAL, Bharat Dynamics, Mazagon Dock Stay Flat Despite India-Pakistan Conflict After Operation Sindoor

— Explained

Introduction: Market Calm Amid Strategic Chaos

The India-Pakistan border witnessed heightened tensions this week following Operation Sindoor, a decisive strategic maneuver conducted by Indian armed forces. While mainstream media buzzed with speculation and patriotic fervor surged on social platforms, the Indian stock market maintained a notably composed stance — particularly in the defence segment. Contrary to public sentiment, key defence stocks like HAL, Bharat Dynamics, and Mazagon Dock closed flat or showed marginal movement. The question on every investor’s mind: why aren't defence stocks reacting to geopolitical fireworks?

Let’s dissect the market psychology, institutional perspective, and underlying fundamentals that kept the defence segment grounded during a moment that otherwise commands attention.

Section 1: Operation Sindoor — A Quick Recap

What Happened and Why It Matters

Operation Sindoor, named symbolically after India’s cultural identity and resilience, was a swift and targeted response to escalating ceasefire violations along the Line of Control. While details remain classified, defense sources confirmed the use of drone reconnaissance, coordinated artillery, and strategic territorial advancements.

The market reaction? Surprisingly tepid. On the day after Operation Sindoor:

• HAL traded flat, up merely 0.4%.

• Bharat Dynamics saw a minor dip of 0.3%.

• Mazagon Dock remained unchanged.

• Cochin Shipyard saw a marginal uptick of 0.6%.

This flatline performance raises valid questions about investor expectations and broader sentiment toward India’s defence manufacturing sector.

Section 2: Historical Behaviour of Defence Stocks During Conflicts

Geopolitical Tensions Don’t Always Mean Stock Gains

Contrary to popular belief, defence stocks don’t always rally during military escalations. Historical data from the Uri Surgical Strike (2016), Balakot Air Strike (2019), and Galwan Valley skirmish (2020) shows a short-term uptick that quickly normalized.

Key patterns include:

• Initial spike on emotion-driven trades

• Profit-booking in anticipation of policy delays

• Long-term moves based more on government contracts and budget announcements

Therefore, Operation Sindoor follows a familiar pattern of muted or short-lived reaction in listed defence counters.

Section 3: Why Are HAL, Bharat Dynamics, and Others Staying Flat?

1. No Immediate Order Flow or Contract Announcements

While Operation Sindoor is strategic in nature, it hasn’t yet translated into new defence procurement orders. For stocks like HAL and Bharat Dynamics, market momentum often hinges on:

• Defence Acquisition Council (DAC) approvals

• Large export deals

• Government-to-government contracts

Since no such developments have coincided with the military event, investors are choosing to wait.

2. Budget Cycle Already Priced In

The Interim Budget 2025 had already allocated a considerable amount toward defence capex. Market expectations around this had been priced in earlier this year. With no fresh allocations or policy rollouts post-Operation Sindoor, there's no new trigger to move the stocks.

3. Valuations Near Peak

Many defence stocks had already rallied significantly in 2024:

• HAL gained over 100% in the past 12 months.

• Mazagon Dock soared over 220% in two years.

• BDL also touched near-term highs.

This has led to investor caution, as the sector now trades at rich valuations, limiting further upside without fundamental catalysts.

Section 4: Sector-Wide Fundamentals Remain Strong

Make-in-India & Export Growth Continues

Despite the market’s short-term apathy, the long-term prospects of the Indian defence sector remain compelling:

• Make-in-India initiatives are pushing indigenization.

• India has exported over ₹21,000 crore worth of defence products in FY24, a record high.

• HAL is executing orders for countries like the Philippines and Argentina.

• Mazagon Dock is building stealth warships under Project 17A.

Yet, since these narratives are not new, they don’t offer immediate upside amid geopolitical volatility.

Section 5: Institutional Perspective and FII Strategy

What the Smart Money Is Doing

FIIs and DIIs have largely been net sellers in defence counters in recent weeks, booking profits amid elevated valuations. Some key signals include:

• Reduction in HAL stake by marquee FIIs like Vanguard and Norges Bank.

• Marginal pullback in institutional holding in Mazagon Dock as per March quarter filings.

However, mutual funds remain bullish in the long term, especially on BDL and Cochin Shipyard due to upcoming orders.

Section 6: Retail Sentiment vs Ground Reality

Social Media Buzz ≠ Market Move

Operation Sindoor trended across social platforms, with hashtags like #IndianArmy and #SurgicalStrike gaining momentum. Retail investors anticipated a defence stock rally, placing small trades via platforms like Zerodha and Upstox.

However, the smart money didn’t follow suit. Why?

• No policy shift

• No emergency defence budget

• No significant geopolitical escalation affecting procurement chains

This highlights the gap between emotion-driven expectations and institutional rationality.

Section 7: Company-Specific Analysis

HAL (Hindustan Aeronautics Limited)

• Current Position: Executing orders for LCA Tejas Mk1A, Light Utility Helicopters, and engines for Sukhoi upgrades.

• Recent Catalysts: Order backlog of over ₹85,000 crore.

• Investor Caution: Margins tightening due to fixed-price legacy contracts and inflation in raw materials.

Bharat Dynamics (BDL)

• Strength: Exclusive supplier for Akash and Astra missiles.

• Upcoming Orders: Speculated large-scale orders for MANPADS and anti-tank systems.

• Challenges: Lower EBITDA margins, heavy dependence on DRDO timelines.

Mazagon Dock Shipbuilders

• Focus: Naval construction — submarines (Kalvari class), destroyers (Visakhapatnam class).

• Advantage: Strong balance sheet and excellent execution capability.

• Risk: Order inflow remains inconsistent, creating cyclical earnings.

Section 8: Technical Analysis — Still in Consolidation Phase

• HAL RSI: Hovering around 54 — indicating neutral momentum.

• BDL RSI: Slightly bearish at 42.

• Mazagon Dock RSI: Around 47 — sideways movement.

Volumes have declined significantly post-budget, indicating lack of conviction from both bulls and bears.

Section 9: What's Next for the Sector?

Short-Term Outlook

• Flat to mildly negative unless new order announcements or geopolitical escalation emerges.

• Retail speculation might cause intraday spikes, but institutional flows will cap the upside.

Medium to Long-Term Drivers

• Modi government’s renewed focus on Atmanirbhar Bharat

• Policy clarity post-general elections

• Inclusion of key PSUs into MSCI India Index

• FTA negotiations with friendly nations including UAE and France for defence tech transfer

Flat Today, But Far from Finished

Operation Sindoor may have stirred patriotic sentiment, but the defence stock story is a long game, not a short sprint. HAL, Bharat Dynamics, and Mazagon Dock have already had their time in the sun in recent years — what the market seeks now is fresh fuel in the form of orders, export deals, or policy acceleration.

In the absence of that, the flat movement post-conflict is not surprising. But make no mistake — India’s defence sector is on a slow but solid growth trajectory, and those who stay patient could be well-rewarded in the long run.