Why do defence stocks rise when India-Israel relations improve?

India and Israel have an active defence trade - missiles, drones, radar systems, and electronic warfare equipment. When the two governments signal closer cooperation, markets anticipate new contracts flowing to Indian companies in these areas, especially those already working on joint programmes.

Which Indian defence stocks are most linked to Israel?

Companies with exposure to missile systems, drones, and defence electronics tend to react most. In this rally, Data Patterns, Bharat Dynamics, and Astra Microwave moved the most - all three operate in segments where India-Israel collaboration is active.

What is the Nifty Defence India index?

It tracks listed Indian companies that derive a significant portion of their revenue from defence activities - manufacturing, services, and technology. It includes PSUs like HAL and BEL as well as private players. The index gained 1.48% on Thursday during this rally.

Is the defence sector a good investment right now?

Defence stocks in India have structural tailwinds - rising budgets, import substitution goals, and growing exports. But they also carry risks: long project timelines, execution risk, and valuations that can run ahead of earnings. This article is informational only - please consult a SEBI-registered advisor before making any investment decisions.

After India's Israel Visit: Why Defence Stocks Rallied 5%

Defence stocks rally as Indian PM visits Israel: what's driving the buzz

Defence stocks jumped up to 5% on Wednesday and Thursday after Indian PM's Israel visit raised expectations of a new defence MoU — here's what's actually happening.

Team Sahi

Published: 26 Feb 2026, 12:00 AM IST (2 days ago)

Last Updated: 26 Feb 2026, 06:40 PM IST (1 day ago)

3 min read

If you've been tracking the markets this week, one theme has stood out: defence stocks.

On Wednesday, several defence-related shares jumped up to 5%. The broader market wasn't as kind. Nifty PSU Bank fell 0.39%, FMCG slipped 0.25%, Realty declined 0.19%, and Oil & Gas edged lower. Reliance Industries dropped 2.12%, SBI fell 1.90%, and Adani Ports declined 1.72%, the session's three biggest losers.

The run continued into Thursday. The timing matters: PM Modi arrived in Israel on February 25 for a two-day visit, his first trip there since 2017. That year, he became the first Indian PM to make a standalone visit to the country. Markets connected that to the defence trade.

Why Israel matters here

India and Israel have worked together on missiles, drones (UAVs), and surveillance systems for years. This trip is expected to cover the bilateral strategic partnership, and there are reports a defence MoU may be signed on missile defence and advanced weapons systems.

Which stocks moved

On Thursday, the Nifty Defence India index gained 1.48%. Notable movers:

Company	Change
Hindustan Aeronautics Ltd	+0.50%
Bharat Electronics Ltd	+2.28%
Data Patterns (India) Ltd	+4.60%
Bharat Dynamics Ltd	+2.56%
Astra Microwave Products Ltd	+3.73%

These companies cover missile systems, defence electronics, and aerospace - areas where India and Israel already work closely together.

The visit is a trigger, not the whole story

India's defence production crossed ₹1.5 lakh crore in FY25, a record. Defence exports hit over ₹23,000 crore. The Union Budget 2026 allocated ₹6.81 lakh crore to the Ministry of Defence.

The government's direction hasn't changed in years: reduce imports, build locally, push for technology transfers, and grow exports. A new counter-terrorism policy called "Prahaar" adds to that picture, though it won't move stock prices on its own.

Why markets react so fast

Defence stocks have always been sensitive to geopolitical headlines—borders, deals, and bilateral visits. The reaction is fast; the business impact is slow. An MoU is a starting point. Projects take years. Revenues come in phases. Margins vary deal to deal.

So the excitement this week is real, but it's partly anticipation. What matters is what actually gets signed and whether those contracts translate into order inflows over the next few quarters.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a SEBI-registered advisor before making investment decisions.