Domestic Defence Stocks Rally Over 9% In Sync With European Stocks On Fears Of US Withdrawal From Ukraine, Europe

Shares of major domestic defence players gained over 9 per cent on March 4, 2025 on the NSE. The stocks gained following newly-announced defence policy decisions by US President Donald Trump and heightened fears around the US withdrawing its support to European security.

Amid the heightened fears, European leaders are now considering ways to re-evaluate their defence strategies and funding. This in turn led to a rally in European defence stocks, which was mirrored by domestic defence stocks on March 3, 2025.

As Indian stock markets opened on March 4, shares of Garden Reach Shipbuilders & Engineers (GRSE) surged 9.61 per cent to hit an intraday high of Rs 1,331.05 apiece on the NSE. Shares of other major players, such as Mazagon Dock Shipbuilders gained 5.51 per cent to trade at a day-high of Rs 2,272 apiece on the NSE while those of Hindustan Aeronautics rallied 4.48 per cent to hit an intraday high of Rs 3,330 apiece.

Why Are Domestic Defence Sector Stocks Gaining?

An increase in global defence expenditure and the Centre’s initiative to bolster self-reliance in defence manufacturing can potentially keep investor interest in the sector strong. Additionally, the uncertainty regarding the US stance on Ukraine and also Europe at large are contributing to the rally witnessed by key domestic defence sector stocks.

Closer home, Defence Secretary Rajesh Kumar Singh presented the report of the Empowered Committee for Capability Enhancement of the Indian Air Force (IAF) to Defence Minister Rajnath Singh on March 3, 2025. The Committee highlighted ‘key thrust areas’ and made recommendations for implementation in the short-, medium- and long-term to achieve the desired capability enhancement goals of the lAF.

The report also emphasised the need for enhancing ‘Aatmanirbharta’ or self-reliance in aerospace, with the private sector complementing the effort of defence sector public sector undertakings (PSUs) and the Defence Research and Development Organisation (DRDO).

Earlier on March 2, European leaders led by the United Kingdom and France held a summit in London where they discussed ways to forge a peace deal for Ukraine and ways to deal with rising fears around US withdrawing its support for European security, following Trump and Ukrainian President Volodymyr Zelenskyy’s meeting at the Oval Office.

Following the Oval Office confrontation between the two leaders, European leaders are likely to grapple with challenges, such as looking for ways to support Ukraine while also ensuring that peace deals with Russia come with some strong security guarantees. A report by news agency Reuters citing a White House official privy to the matter stated that Trump has paused military aid to Ukraine following his clash with the Ukrainian President.

At the time of writing, Hindustan Aeronautics shares were trading at Rs 3,284.85 apiece, up by 3.07 per cent on the NSE. Shares of Mazagon Dock Shipbuilders were trading at Rs 2,178.6 apiece on the NSE, up by 1.18 per cent, while those of Garden Reach Shipbuilders & Engineers were trading at Rs 1,259.95 apiece, up by 3.76 per cent.