Drone Stocks Surge 50% Post Operation Sindoor On Hopes Of Defence Orders; Will The Rally Continue?
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Defence and drone manufacturing stocks have witnessed a sharp surge following the launch of Operation Sindoor
Drone Stocks Rally: Drone manufacturing and defence-related stocks have witnessed a sharp surge following the launch of Operation Sindoor, India's military response to the April 22 terrorist attack in Pahalgam.
Since May 7, shares of key players such as IdeaForge Technology, Paras Defence, Zen Technologies, Hindustan Aeronautics (HAL), Bharat Electronics (BEL) and DCM Shriram Industries have gained between 8% and 50%. The rally has been driven by expectations of increased government spending on defence technology, particularly unmanned aerial systems.
India's defence ecosystem has matured significantly in recent years, underscored by enhanced integration of indigenous technologies in drone warfare, electronic warfare, and layered air defence systems. The precision and preparedness displayed during recent border escalations have earned international recognition, reinforcing investor confidence in India's defence manufacturing capabilities.
'With greater operational sophistication and reliable indigenous production, Indian defence companies are well-positioned for sustained growth," analysts said. The prevailing sentiment reflects confidence in a new strategic doctrine—swift, technology-led retaliation in response to acts of terrorism.
While defence stocks have rallied significantly, several analysts believe valuations are now approaching fair levels.
'India's leading defence names are likely to continue performing well, but future upside depends on several variables including order visibility and budgetary priorities," said Manoranjan Sharma, Chief Economist at Infomerics Valuation and Ratings.
Ambareesh Baliga, a Mumbai-based independent analyst, expects momentum in drone-related stocks to continue, with potential gains of another 15-20% in the short term.
Long-Term Demand Drivers
Operation Sindoor demonstrated the increasing use of drones in both surveillance and combat. Market expectations are building around a sustained push for drone procurement by the Indian military. According to Grand View Research, India's military drone market, valued at $1.53 billion in 2024, is projected to reach $4.08 billion by 2030, growing at a CAGR of 17.9%.
What Should Investors Do Now?
Despite strong growth prospects, analysts and fund managers are urging investors to remain cautious.
'Drone stocks have seen a rapid run-up, and much of the anticipated government spending is already factored into current prices," said Ashwini Shami, EVP & Portfolio Manager at OmniScience Capital. 'Valuations are now stretched, with many trading at high P/E multiples."
Shami prefers public-sector defence firms like HAL and BEL, citing stronger order visibility, wider moats, and more reasonable valuations compared to smaller private peers.
The Nifty India Defence Index has rallied 17.9% and 15.4% since the Pahalgam attack and Operation Sindoor, respectively. In contrast, the benchmark Nifty 50 has risen only 2.1% and 1.1% in the same periods.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
First Published:
May 21, 2025, 11:21 IST
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