Defence stocks 2026: Buy calls, targets after volatility

Defence stocks stay in focus after a sharp run

Defence stocks have remained on investor radar after a strong multi-month rally and a fresh bout of volatility. In recent sessions, select counters have posted sharp moves even as the broader defence basket has shown signs of profit booking. Brokerage notes have continued to shape sentiment, with stock-specific targets and sector-level caution often appearing side by side.

Two names that stood out in the latest flow of updates were Mazagon Dock Shipbuilders and Solar Industries India. Mazagon Dock has seen a short-term price momentum phase, while Solar Industries drew multiple brokerage views despite a mixed quarterly outcome. In parallel, the Nifty India Defence index has reflected both extremes: stretches of consecutive gains and sudden sector-wide declines.

Mazagon Dock extends a short-term uptrend

Mazagon Dock Shipbuilders Ltd shares have been on an uptrend over the past few sessions. The stock closed in the green in seven of the last eight sessions, rising nearly 21% over that period. It also logged its sixth straight session of gains on a Monday, highlighting the persistence of buying interest during the move.

On that Monday, Mazagon Dock shares rose 1.02% to settle at Rs 2,494.50 on the BSE. The move came amid broader investor interest in defence names, even as market participants have also flagged valuation risks across the segment. The stock’s recent run has made it a frequent reference point in discussions around momentum versus fundamentals within defence PSUs.

ICICI Direct’s ‘Buy’ call and target on Mazagon Dock

ICICI Direct, in its latest note, maintained a ‘Buy’ rating on Mazagon Dock. The brokerage set a target price of Rs 3,060 per share. The target is based on 35x FY28E EPS.

ICICI Direct said this implies a 22% upside from current levels over a 12-month period. The note provides a valuation anchor for investors tracking whether the recent run-up is supported by forward expectations or has already priced in a large part of the optimism.

Solar Industries: mixed quarter, but brokerages stay constructive

Brokerage firms continued to remain positive on Solar Industries India Ltd after the company reported a mixed set of numbers for the quarter ended December 31, 2025. The company reported a 41.7% year-on-year rise in net profit to Rs 446.3 crore. Revenue rose 29.2% year-on-year to Rs 2,548.3 crore for the quarter.

Despite those growth rates, earnings were below analysts’ estimates, according to the update. Still, the positive stance from brokerages was supported by operating drivers that included defence and international business contributions. Solar Industries’ Ebitda was aided by defence and international operations, with the note also mentioning that Pinaka deliveries were delayed to Q4.

Order book details and recent order inflow

ICICI Securities said Solar Industries reported its order book at an all-time high of Rs 21,000 crore. It also cited a defence order book of Rs 18,000 crore, including export orders of Rs 11,000 crore. Separately, order inflow in the three months till end-January 2026 cumulatively stood at Rs 6,000 crore.

The note also pointed to improvement in business from CIL amid a pick-up in mining activities post monsoon. Management commentary referenced in the brokerage note said it remained confident of achieving FY26 goals and guided for overall growth of 20% with Ebitda margins of 27% over the next 3 to 5 years.

Solar Industries: targets vary across brokerages

ICICI Securities maintained a ‘buy’ rating with a target price of Rs 17,200. Nirmal Bang Institutional Equities also maintained a ‘buy’ and valued the company at 55 times December 2027E EPS, with a target price of Rs 17,476.

Nuvama Institutional Equities said Solar Industries reported an in-line Q3FY26 versus Street, led by international and defence revenue growth, with operating margins at 27.8%. It highlighted catalysts such as commercialisation of the 155mm shell and a pickup in Pinaka deliveries. Nuvama trimmed its target price to Rs 15,800 from Rs 18,000 earlier, after trimming FY27E/28E EPS.

The stock was noted as being down nearly 26% from its 52-week high of Rs 17,805 hit in June 2025. Despite that decline from the peak, the stock was up 10% in 2026 so far. It was also noted that Solar Industries was trading at a one-year forward P/E of 47 times, above its five-year average P/E of 45 times.

Defence index pulls back as valuations and liquidity bite

Defence stocks came under broad pressure in one session where 16 out of 18 constituents of the Nifty India Defence index traded in the red. The index slipped as much as 1.76% to an intraday low of 7,814.60 and was down 1.71% at 7,819.25 around 11:30 AM. In comparison, the Nifty50 was down 0.51% at 25,898.85.

Specific stocks were cited as declining in that session, including Zen Technologies (down 1.45% to Rs 1,372), GRSE (down 1.76% to Rs 2,562.30), Data Patterns (down 1.38% to Rs 2,855), Mazagon Dock (down 1.17% to Rs 2,620), BEML (down 1.05% to Rs 1,774), HAL (down 1.01% to Rs 4,462.80) and MTAR Technologies (down 0.39% to Rs 2,517.70). Only Unimech Aerospace and Cyient DLM held marginal gains.

Market experts attributed the weakness to valuation concerns, liquidity pressures and profit booking. Chokkalingam G of Equinomics Research linked pressure to liquidity constraints in smallcaps and midcaps alongside stretched valuations. Ravi Singh of MasterTrust referred to investors locking in profits and a shift away from high-momentum sectors amid jittery global cues and firm bond yields.

Sector performance: strong 3-month returns, but uneven near-term trend

Separate market data points showed the sector’s recent run-up and its sensitivity to corrections. The Nifty India Defence index was cited as rising over 42% over three months, with all 18 stocks participating. The index also declined 2.68% over the past month and slipped more than 9% in the last six months, lagging the Nifty50 which was up 6% over the same period.

Another update said defence stocks retreated after a sharp three-month rally, with the Nifty India Defence Index dropping over 2% amid profit booking and valuation concerns. Bharat Dynamics fell to the day’s low of Rs 1,887.60 on the NSE after Motilal Oswal Financial Services initiated coverage with a ‘Neutral’ rating and a target price of Rs 1,900.

BEML board to consider share split; Q4 numbers highlighted

BEML said it would consider an equity share split at a board meeting on July 21, 2025, with the stated intent of improving liquidity. The trading window, which closed on July 1, was to remain closed until 48 hours after the company announces its financial results. In the related update, BEML’s market capitalisation was cited at Rs 18,722 crore.

The stock moved up to Rs 4,530, hitting a high of up to 2.28% from its previous close of Rs 4,428.90. Over the past year, the stock was noted as having delivered a negative return of 10%.

For Q4FY25, BEML reported revenue of Rs 1,653 crore, up 9% year-on-year from Rs 1,514 crore and up 89% quarter-on-quarter from Rs 876 crore. Net profit stood at Rs 288 crore, up 12% year-on-year from Rs 257 crore and up 1,100% from Rs 24 crore reported in Q3FY25.

Key data points at a glance

Market impact: how investors are reading the signals

The recent set of updates captures the push and pull in defence stocks. On one side are momentum phases in select names and brokerage targets that continue to indicate upside from then-prevailing prices. On the other are sessions where broad-based selling hits the sector, driven by profit booking and concerns around valuations and liquidity.

For stock pickers, the divergence matters. Solar Industries drew constructive commentary despite a Q3 miss versus estimates, largely because brokerages highlighted defence and international contributions and an elevated order book. In the case of Mazagon Dock, a short-term rally coincided with a valuation-based target, offering a defined reference point for investors evaluating risk-reward.

Analysis: why valuation discipline is back in the conversation

A common thread across the sector commentary is the role of valuation and sentiment. Analysts and market experts have repeatedly pointed to stretched valuations in pockets of the defence theme and the potential for volatility when expectations are high. Liquidity constraints in smallcap and midcap segments were also cited as a factor behind sudden sector-wide weakness.

At the same time, brokerages have pointed to the strength of order inflows and guidance for revenue growth across covered companies. ICICI Securities noted that most companies under its coverage guided for more than 15% revenue growth in FY26, driven by robust order inflow after Operation Sindoor. It also highlighted that select names such as Bharat Dynamics, Solar Industries and Azad Engineering could see 25% to 30% growth.

Conclusion: stock-specific calls continue amid sector swings

Defence stocks continue to see fast rotations between rally phases and sharp pullbacks. Mazagon Dock’s recent run and ICICI Direct’s Rs 3,060 target illustrate how momentum and brokerage valuation frameworks can reinforce interest in the near term. Solar Industries remains a stock where brokerages have stayed positive, anchored by order book disclosures and margin commentary even as targets differ.

Near term, investors are likely to keep tracking order inflows, delivery timelines such as Pinaka-related schedules mentioned in brokerage commentary, and board-level events like BEML’s July 21, 2025 meeting on a share split, alongside broader index moves and liquidity conditions.