Defence Dips: BDL and GRSE Retreat as Valuations Hit Crossfire

India's defense space, which has witnessed a spectacular rally after 2025, is now in the grip of a steep correction. For the second day running, shares such as Bharat Dynamics Ltd (BDL), Garden Reach Shipbuilders & Engineers (GRSE), and Hindustan Aeronautics Ltd (HAL) have fallen more than 3%, reducing the Nifty India Defence index by 2.3%.

Principal causes of the sell-off:

Motilal Oswal cut BDL to a 'Neutral' rating with a target of Rs 1,900 due to high valuations and lack of near-term appreciation.

GRSE declined 3.3% to Rs 2,800.10, maintaining its 11% monthly decline despite a 96% six-month increase

HAL, Shipyard Cochin, and Solar Industries also declined over 2%, while Mazagon Dock, BEL, and Paras Defence lost slightly

BDL's latest 69% YTD peak surge and GRSE's 75% surge have lured profit-booking at better levels

Geopolitical cooling adds pressure:

Israel-Hamas ceasefire signs and de-escalation of tensions between Iran and Israel have relaxed pressure for defence escalation

Operation Sindoor's pace is slowing down and world conflict-driven emotion is wearing off

Investors are repricing risk premiums and switching out of oversold defence counters

Valuation issues worsen:

Analysts warn defence stocks are trading on stretched earnings multiples, with BDL at 70x FY26 estimates

Without new order flows or budget triggers, upside appears to be limited in the near term

Sources: Economic Times, Moneycontrol, News18, NiftyTrader, Financesaathi, BloombergQuint, Business Standard