Defence Stocks Soar Up To 45% YTD: Can Rally Continue Amid Valuation Concerns?

• Nifty India Defence index rose 19% in 2025, with 14 of 18 constituents in green YTD; Garden Reach Shipbuilders & Engineers led with 45% gain.
• MTAR Technologies, Paras Defence, and Bharat Electronics advanced over 30%; Zen Technologies plunged 45%, while Cyient DLM, Unimech, BEML also faced pressure.
• Rally driven by large order backlogs, geopolitical conflicts, Atmanirbhar Bharat push, record defence contracts (Rs 2.1 trillion in FY25), 92% domestic procurement, and record exports (Rs 23,620 crore in FY25).
• Record defence budget (Rs 6.81 lakh crore), strong export growth, multi-year order books, and Make in India policy fuel momentum, despite global tensions.
• Valuation concerns persist with median PE above 50; experts expect slower price appreciation but long-term structural growth remains intact; top picks include Astra Microwave, BEL, HAL, Mazagon Dock, Solar Industries, Data Patterns.

Why It Matters: Defence stocks show strong YTD gains driven by policy and geopolitics, but high valuations prompt caution for future momentum.