Following the recent India-Pakistan ceasefire, defence stocks in India and China have moved in sharply contrasting directions, reflecting both the battlefield realities and investor sentiment shaped by Operation Sindoor and its aftermath.

After the Pahalgam terror attack, India launched Operation Sindoor, targeting terrorist camps in Pakistan and Pakistan-occupied Kashmir. In response, Pakistan deployed extensive drone attacks and Chinese-supplied weaponry, including J-10C fighter jets and PL-15 air-to-air missiles. However, India relied heavily on indigenous defence systems, enabling precise strikes on Pakistani assets and demonstrating technological superiority. Satellite imagery later confirmed the effectiveness of India's operations, contradicting Pakistani claims of significant damage to Indian airbases.

The market reaction was swift and decisive. Indian defence stocks surged as Operation Sindoor showcased the effectiveness of home-grown weaponry and advanced domestic technology. The Nifty India Defence Index jumped by 10% in just three days, with companies such as IdeaForge, Garden Reach Shipbuilders & Engineers (GRSE), Cochin Shipyard, and Bharat Dynamics registering gains of up to 38% within a week. Since the Pahalgam incident, major defence firms like Cochin Shipyard, Bharat Dynamics, Mazagon Dock Shipbuilders, and Paras Defence and Space Technologies have seen their stock prices rise between 10% and 35%. This rally reflects investor confidence in India's indigenous defence capabilities and the expectation of increased government defence allocations in the wake of renewed military tensions.

Industry experts attribute this surge to several factors:

The unequivocal success of Operation Sindoor, powered by indigenous technologies.
Anticipation of increased defence spending to replenish and upgrade military inventories.
Opportunities for India to expand defence equipment exports, leveraging its proven capabilities in modern conflict scenarios.

In stark contrast, Chinese defence stocks experienced a significant downturn. Firms like Avic Chengdu Aircraft Co. (maker of the J-10C) and Zhuzhou Hongda Electronics Corp (producer of the PL-15 missile) saw their shares fall by 9% and 10% respectively over three trading sessions. Other major Chinese defence companies, such as China Aerospace Times Electronics, Bright Laser Technologies, North Industries Group, China Spacesat, and AVIC Aircraft, recorded declines ranging from 5% to 10%.

This sell-off was triggered by the realization that Chinese military equipment, widely used by Pakistan, had underperformed against India’s indigenous systems. Furthermore, hopes of increased Chinese arms exports to Pakistan were dashed by the ceasefire, leading to a sharp reversal in investor sentiment.

The divergent performance of Indian and Chinese defence stocks not only mirrors the outcomes of the recent conflict but also signals broader shifts in the global defence market. India's demonstrated military prowess and technological self-reliance have bolstered its defence sector, while China’s reputation as an arms supplier has taken a hit due to the perceived underperformance of its equipment in real combat conditions.

The post-ceasefire period has seen Indian defence stocks rally robustly on the back of military success and expectations of higher government spending, while Chinese defence stocks have nosedived as confidence in their products and export prospects waned following the India-Pakistan conflict.

Based On TOI Report