HAL, BEL to Tejas Networks: Defence stocks, drone shares rally as US, Israel attack Iran

Shares of Tejas Networks, Paras Defence and Spaces, ideaForge Technology, Bharat Electronics (BEL), and Hindustan Aeronautics (HAL) surged up to 15% on Monday, March 2, following heightened geopolitical tensions in West Asia, resulting in a full-scale war in the area.

According to experts, defence stocks typically respond favourably to such conflicts, as they lead to an increased need for defence equipment and the components necessary for their production.

Harshal Dasani, Business Head, INVasset PMS, explained that defence stocks are witnessing renewed investor interest, as heightened geopolitical tensions increase the probability of higher global defence spending, faster procurement cycles, and policy prioritisation of indigenous manufacturing. India has already been on a structural defence push with rising budget allocations and a strong focus on domestic production. Any prolonged conflict globally tends to accelerate capital allocation toward security and strategic capability, he said.

“While short-term volatility cannot be ruled out, defence stocks often act as relative outperformers during periods of geopolitical stress, whereas aviation remains sensitive to oil volatility and demand uncertainty,” Dasani added.

Antique Stock Broking noted that BEL and BDL rely on Israel for their supply chains. Any extended geopolitical tensions with Iran could create supply chain risks for these companies, a situation reminiscent of what was previously seen during the Israel-Palestine conflict, they mentioned.

The conflict in the Middle East intensified over the weekend following the bombing of Iran by the US and Israel. Iran's retaliation, which involved attacks on other GCC nations, escalated the gravity of the situation; however, the conflict is anticipated to be relatively brief, spanning from several days to a few weeks, due to the imbalance between the two sides and the weakening of Iran's leadership.

Technical Views

According to Anshul Jain, Head of Research at Lakshmishree, post budget, most defence names have corrected 10 to 15%, reflecting profit booking and sector-wide cooling. However, Bharat Electronics and MTAR Technologies have held ground and continue to display clear relative strength versus both the defence index and the broader market.

“For traders seeking long exposure in defence and drone themes, BEL and MTAR Tech offer cleaner setups and better-defined risk. As long as they sustain above their recent breakout zones, continuation toward higher levels remains the higher-probability outcome,” said Jain.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.