India-Israel defence deal: Defence stocks extended their rally for the second consecutive session, rising nearly 4% on Thursday, February 26. The Nifty Defence India index was trading 1.07% higher, amid strong investor interest ahead of the India-Israel defence deal.
Astra Microwave Products’ share price led the gains, rising more than 4.25% to ₹8,181.80, followed by Data Patterns, which advanced 3.70%.
Unimech Aerospace and Manufacturing Limited and Solar Industries shares were also trading about 3% higher on Thursday.
Other defence stocks, including Bharat Dynamics Limited (BDL) and Bharat Electronics Limited (BEL), gained around 1.5%, while Hindustan Aeronautics Limited (HAL) and Paras Defence and Space Technologies also traded in positive territory.
The rally in stocks comes as investors await the announcement of a new defence deal between India and Israel. PM Narendra Modi departed for Israel on a two-day state visit on February 25. This is his first trip to the country since 2017, when he became the first Indian Prime Minister to undertake a standalone visit there.
What do we know so far about the India-Israel deal?
As per media reports, unlike previous agreements, the focus this time will not be merely on buying new weapons, and there is unlikely to be any direct arms purchase. Instead, the focus is on the transfer of technology for highly advanced weapons systems, some of which Israel has not offered to any other nation so far, according to a report by the Times of India.
“In today’s uncertain world, a strong defence partnership between trusted partners like India and Israel is of vital importance,” Modi said during his address to the Israeli Parliament, Knesset.
A key pillar of this expanding partnership is missile defence. Prime Minister Narendra Modi announced “Mission Sudarshan Chakra” during his Independence Day address, outlining a roadmap to develop a robust, multi-layered missile defence shield for the country.
The TOI report further revealed that the latest defence cooperation between India and Israel, formalised through an MoU, is likely to have two key aspects: partnerships in defensive systems and collaboration on offensive weaponry, according to Israeli media reports.
On the defensive front, potential agreements are likely to centre around systems developed by Israel Aerospace Industries, as well as solutions from Rafael Advanced Defence Systems and Elbit Systems, the report said. However, the companies involved have not disclosed details regarding the proposed deals.
Is it the right time to invest in defence stocks?
With Prime Minister Narendra Modi’s visit to Israel drawing attention, the market’s defence theme has returned to the spotlight — reflecting strategic messaging overseas and stronger order book visibility domestically, said Jickson Sajee, Research Analyst at INVasset PMS.
He added that India–Israel relations have historically been rooted in defence cooperation, covering areas such as missiles, UAVs, and surveillance technologies, and the visit highlights continued momentum in that partnership.
According to Seema Srivastava, Senior Research Analyst at SMC Global Securities, India’s defence sector continues to offer compelling long-term prospects, underpinned by strong government focus on indigenisation, rising budget allocations, and a steady pipeline of modernisation projects across air, land, and naval platforms.
“From a sectoral perspective, the defence industry is transitioning from sporadic order flows to more predictable, program-driven execution, which favours companies with scale, diversified offerings, and proven delivery track records,” Srivastava said.
Top defence stocks to buy
Srivastava of SMC Global Securities, believes that HAL and BEL stand out as structural beneficiaries.
HAL and BEL
HAL’s consistent revenue growth and margin expansion reflect its robust execution capabilities and leadership in aircraft manufacturing, while BEL’s diversified portfolio across radars, communication systems, and electronic warfare ensures resilience and scalability. Both companies enjoy healthy order books, which provide multi-year visibility and align well with India’s push for self-reliance in defence manufacturing, she noted.
Mazagon Dock
Mazagon Dock, despite near-term revenue softness, remains strategically important given its role in naval shipbuilding and submarine projects. Its strong order book and execution of critical Indian Navy programs position it as a long-term play on maritime defence.
BDL
BDL faces execution challenges and high dependence on lumpy missile orders, which weigh on its near-term attractiveness. While its valuation appears inexpensive, sustained improvement in order inflows and operational efficiency will be key to unlocking value.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.