Published by Lares Algotech
The long-standing tensions between Israel and Iran reached a boiling point earlier this year, rattling global markets and drawing attention to defence-related sectors worldwide. In India, defence stocks such as BEML, Garden Reach Shipbuilders & Engineers (GRSE), and Zen Technologies witnessed a surge in investor interest during the conflict. However, the announcement of a ceasefire between the two nations has triggered a new wave of market sentiment—prompting investors to question the immediate future of Indian defence stocks.
Let’s break down how this geopolitical development is impacting Indian defence companies and what retail and institutional investors should know.
🕊️ The Ceasefire: A Global Relief, But Market Shaker
The sudden announcement of a ceasefire between Israel and Iran has momentarily cooled regional tensions in the Middle East, leading to:
- A drop in crude oil prices
- A broad rally across Indian equity indices
- A temporary pullback in defence sector stocks, which had previously rallied on war-related momentum
The conflict had earlier prompted global investors to hedge into defence and energy sectors, expecting escalated defence spending across the board. Now, with peace talks and de-escalation efforts succeeding, many of those speculative positions are unwinding.
📉 Immediate Market Reaction: Profit-Booking Hits Defence Stocks
Here’s a snapshot of how Indian defence stocks reacted:
🔻 BEML
- Declined by over 5% post-ceasefire
- Previously surged amid speculation of increased defence and logistics orders
- Long-term fundamentals remain strong, given its role in defence manufacturing, heavy vehicles, and aerospace components
🔻 GRSE (Garden Reach Shipbuilders & Engineers)
- Dropped nearly 6% on June 24, 2025
- Had gained significantly in the past month due to expectations of increased naval procurement and export orders
- Still sits on a healthy order book from the Indian Navy
🔻 Zen Technologies
- Fell around 3% after the ceasefire announcement
- Known for defence training simulation systems and cutting-edge military tech
- Recently saw strong buying due to geopolitical tensions and a growing emphasis on training modernization
📊 Why Were These Stocks Rallying Before?
The rally in defence stocks was supported by a mix of global and domestic tailwinds:
Geopolitical Risk Premium
Any regional conflict tends to increase defence budgets and international arms deals. Indian firms with export licenses and strong domestic pipelines tend to benefit.
Strong Domestic Policy Support
India has doubled down on the ‘Aatmanirbhar Bharat’ (self-reliant India) initiative, encouraging indigenous defence production and reducing imports.
Export Opportunities
Zen Tech and GRSE have been securing export orders from friendly nations looking to diversify away from traditional defence suppliers.
Budget Allocation
India’s interim budget in 2024-25 allocated ₹6.2 lakh crore towards defence, with capital outlays rising steadily each year.
📉 Why the Pullback Now?
The correction in stock prices isn’t necessarily a sign of weakness in the companies themselves. Here are key reasons for the dip:
Profit Booking
Investors who entered during the conflict surge are now cashing out on gains.
Risk Reallocation
As geopolitical fears subside, investors rotate funds into other sectors like infrastructure, energy, and consumer discretionary.
Stabilized Oil Prices:
Falling crude prices are good for India overall but reduce the war-driven rally seen in defence and energy stocks.
📈 Are the Fundamentals Still Intact?
Yes, and here’s why:
🔹 BEML: Diversified Defence Portfolio
BEML plays a crucial role in India’s land-based defence systems. From armoured recovery vehicles to missile launchers, its portfolio remains critical. The company also benefits from:
- Government capex on railways and metro
- Ongoing Make-in-India contracts
- A robust R&D pipeline for military applications
🔹 GRSE: Naval Powerhouse
As one of India’s leading shipbuilders for the Navy and Coast Guard, GRSE stands to benefit from:
- Navy’s long-term modernization plans
- Demand for anti-submarine warfare vessels and missile corvettes
- Strategic partnerships for exports in Southeast Asia and Africa
🔹 Zen Technologies: Simulation and AI Edge
Zen Tech sits in a niche segment—combat training simulation systems. Its competitive advantages include:
- High-margin contracts for defence training modules
- Partnerships with DRDO and armed forces
- Increasing emphasis on AI-based real-time war simulation systems
🧠 Lares Algotech View: Sector Analysis
At Lares Algotech, our proprietary sentiment models and quant-based portfolio strategies suggest the following trends:
| Stock | 3-Month Momentum | Volatility Score | Algo View |
| BEML | Moderate ↑ | High | Hold on dip, accumulate below ₹4,000 |
| GRSE | Strong ↑ | Medium | Long-term Buy, target ₹950-1,000 |
| Zen Tech | High ↑ | Very High | Short-term correction possible; Long-term potential intact |
Our Quant Sentiment Dashboard flagged high RSI values for GRSE and Zen Tech during the conflict, indicating overbought zones. Post-ceasefire dips were expected and now create better entry zones for long-term holders.
🔮 What Should Investors Do Now?
Don’t Panic on Short-Term Dips
Corrections after geopolitical resolutions are common. Focus on fundamentals, not daily fluctuations.
Look at Budget Season
India’s full-year budget in July 2025 could provide fresh cues on defence spending. Any upward revision or new scheme for indigenous defence manufacturing would be a bullish trigger.
Monitor Export News
Keep track of export orders. Zen Tech recently signed an MoU for simulation systems with a Middle Eastern ally—such deals could continue even as tensions ease.
Diversify Within the Sector
Spread exposure across various sub-segments—land (BEML), sea (GRSE), and training tech (Zen Tech). This balances your defence portfolio.
🌐 Global Context Still Favors Defence Spending
Despite the ceasefire, long-term global defence expenditure is not slowing down. NATO’s expanded commitments, Indo-Pacific tensions, and China’s assertiveness in Taiwan mean that defence continues to be a strategic sector. Indian companies that prove capability, cost-efficiency, and reliability will remain in demand globally.
📝 Final Thoughts: Time to Watch, Not Withdraw
The Israel-Iran ceasefire was a welcome development for global peace—but for defence investors, it signals a time for strategy, not exit. The dip in BEML, GRSE, and Zen Tech is more of a profit-booking phase than a fundamental trend reversal.
