Indian defence stocks surged on Tuesday following Defence Minister Rajnath Singh's approval of the execution model for the Advanced Medium Combat Aircraft (AMCA) programme, aimed at developing the nation's first fifth-generation stealth fighter jet.
The Nifty India Defence Index climbed over 1.86 per cent to 8,713.15 in the intraday trading session on May 27. Nifty India Defence was trading at the 6,940 levels on May 7, has now surpassed 8,700, recording a 23 per cent gain in just 15 trading sessions.
Shares of Garden Reach Shipbuilders & Engineers (GRSE) reached an intraday high of nearly five per cent, while Bharat Dynamics Ltd. (BDL), Mazagon Dock Shipbuilders Ltd., Hindustan Aeronautics Ltd. (HAL), and Bharat Electronics Ltd. (BEL) posted intraday gains between 0.5 per cent and four per cent. Notably, BDL, Data Patterns, GRSE, and Paras Defence have more than doubled in value, with increases up to 131 per cent from their respective three-month lows.
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Strategic Significance Of AMCA
The AMCA project, led by the Aeronautical Development Agency (ADA), aims to produce a twin-engine, fifth-generation stealth fighter jet to bolster the Indian Air Force (IAF), which currently operates 31 squadrons, below the sanctioned strength of 42, according to the Ministry of Defence's statement. The programme invites participation from both private and state-owned enterprises, reflecting a strategic shift towards reducing reliance on HAL and fostering a robust domestic aerospace industry.
The approval comes amid heightened tensions with Pakistan following India's Operation Sindoor on May 7, which targeted nine terror hubs in Pakistan and Pakistan-occupied Kashmir in response to the April 22 Pahalgam attack that killed 26 tourists. In retaliation, Pakistan launched 413 drone attacks targeting Rajasthan's borders and airbases, all of which were successfully intercepted by Indian forces.
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Analysts at IIFL suggest that the defence sector could outperform others, citing strong order visibility and positive sentiment. Bharat Electronics is highlighted as a top pick due to its exemplary execution track record among state-owned companies. Furthermore, Antique Stock Broking projects that the combined order books of Cochin Shipyard, GRSE, and Mazagon Dock could more than triple by FY27, driven by a strong government push for indigenisation and rising export potential, according to a report by Bloomberg.
