Defence stocks gain up to 3% on March 2 as Middle East tensions intensify; Nifty India Defence index up 58% in 1 year

Defence-linked stocks extended gains in early trade on Monday, March 2, tracking rising geopolitical tensions in the Middle East. Shares of Bharat Dynamics Limited, Bharat Electronics Limited, and Hindustan Aeronautics Limited were among the key gainers.

Other companies in the segment, including Solar Industries India Limited, Data Patterns (India) Limited, Paras Defence and Space Technologies Limited, and MTAR Technologies Limited, also traded with positive bias.

The Nifty India Defence index advanced over 1.5 per cent to 8,249.70 in morning deals, with 17 of the 18 constituents in positive territory. BEL climbed 1.48 per cent, while Data Patterns rose more than 3 per cent.

Escalating geopolitical developments

Investor sentiment turned favourable for defence counters after tensions in the Middle East escalated over the weekend. Coordinated military action involving the U.S. and Israel against Iran heightened concerns of a wider regional conflict.

Reports indicated that the strikes resulted in the death of Iran’s Supreme Leader Ayatollah Ali Khamenei, significantly raising geopolitical uncertainty. Israel subsequently launched fresh strikes on Tehran, prompting retaliatory missile attacks from Iran.

The developments triggered volatility across global financial markets. Investors shifted towards traditional safe-haven assets such as gold, while crude oil prices fluctuated sharply amid fears of supply disruptions and broader economic impact.

Defence index outperforms broader market

The Nifty India Defence index has delivered strong returns, rising more than 6 per cent in the past month and over 58 per cent in the last 12 months as of the February 27 close.

The index is designed to capture companies aligned with the defence theme. Eligible stocks are selected from the Nifty Total Market index, provided they belong to relevant industries or derive at least 10 per cent of revenue from defence activities. Constituents are chosen based on six-month average free-float market capitalisation, with individual stock weight capped at 20 per cent.

Funding momentum in defence technology

India’s defence technology ecosystem has also witnessed robust capital inflows. According to Tracxn, the sector attracted USD 247 million (around Rs 2,270 crore) in 2025, marking its highest annual funding so far. Cumulative Equity Funding now stands at USD 711 million (about Rs 6,535 crore).

Annual funding has grown steadily from USD 5 million in 2016 to USD 75 million in 2022 and USD 139 million in 2023. In 2024, the sector raised USD 125 million across 42 rounds. Despite fewer rounds in 2025 year-to-date at 30, total funding nearly doubled year-on-year, largely supported by a USD 100 million Series B investment in Raphe mPhibr.

Data also suggests rising capital concentration, with the top five companies accounting for roughly 53 per cent of the total funding received so far.

India-Israel defence engagement deepens

On the diplomatic front, India and Israel recently upgraded their bilateral ties to a special strategic partnership and agreed to accelerate negotiations on a long-pending free trade agreement.

Following discussions between Prime Minister Narendra Modi and Israeli Prime Minister Benjamin Netanyahu, the two nations signed 17 agreements spanning artificial intelligence, trade, investment, manufacturing, agriculture, maritime heritage, education, and culture.

Both countries also reiterated their commitment to strengthening defence cooperation through joint development, joint production, and technology transfer arrangements in military hardware.

Disclaimer: The article is for informational purposes only and not investment advice.