Defence stocks extended their strong rally on Tuesday following the government’s approval of the execution framework for the Advanced Medium Combat Aircraft (AMCA) programme, aimed at developing India’s most advanced stealth fighter jet. The announcement triggered a wave of buying in defence counters, sending the Nifty India Defence Index to an all-time high of 8,728.20 during intraday trade.
The index, comprising 18 key defence-related stocks, has now risen for five consecutive sessions, recording a 21% gain so far in May. This follows robust monthly gains of 11.5% in April and 25% in March, reflecting strong investor confidence in the sector.
Among the top performers, shares of Garden Reach Shipbuilders advanced nearly 5%, while Bharat Dynamics, Mazagon Dock, Hindustan Aeronautics Limited (HAL), and Bharat Electronics Ltd (BEL) saw intraday gains ranging from 0.5% to 3%.
Stealth Jet Push to Boost Indigenous Defence Capability
The Ministry of Defence confirmed that Defence Minister Rajnath Singh has approved the project execution model for the AMCA, underscoring India’s commitment to strengthening its indigenous aerospace and defence capabilities. The stealth jet programme, which aims to match global standards, will be developed in partnership with a domestic company—open to both public and private sector players, individually or as joint ventures.
This strategic move comes amid escalating regional tensions and a pressing need to modernize the Indian Air Force (IAF), which currently operates only 31 squadrons of primarily Russian-origin aircraft—well below the sanctioned strength of 42 squadrons. Meanwhile, neighbouring China continues to bolster its air force, and Pakistan has already inducted advanced J-10 fighter jets from China.
Market Optimism and Strategic Momentum
The recent upswing in defence shares is driven not just by the AMCA approval, but also by sustained optimism around increased government spending and a supportive geopolitical environment. Notably, India’s precision strikes across the border under ‘Operation Sindoor’ earlier this month demonstrated the effectiveness of domestically manufactured defence systems, reigniting investor interest.
Market analysts suggest that the defence sector is well-positioned to outperform in the current economic and strategic landscape. A report by IIFL, cited by Bloomberg, highlights strong order visibility and robust execution among leading players as key growth drivers. Bharat Electronics has been named as the top pick by IIFL analysts, thanks to its consistent track record and growing export opportunities amid rising global defence budgets.
With heightened focus on national security and self-reliance in defence production, the sector is expected to remain a strong performer on Dalal Street in the near term.
