A good month, I would say, given where we were at the end of March. The month was also marred with a lot of news flow, whether it was regarding tariffs or the Indo-Pak conflict.

Today’s episode is going to be about defense stocks—how they’re grabbing the limelight and how one should be careful in terms of jumping on stocks that are just running away. So that is the second part of the blog.

Where is the market headed?

Market Overview

Let’s first see where the markets went today. Nifty was absolutely flat. Once again, I think Nifty is waiting with bated breath. What is going to happen on the Pakistan front? There is a lot of narrative that’s going around that some action this weekend is likely. There have been small skirmishes on the LOC. Some larger action is expected but who knows whether there will be one right now or at some more opportune time. Nevertheless, the market has started to sort of discount it and yet not fallen off. That’s to the credit of the markets.

Nifty Next 50

So, Nifty – flat. Nifty Jr. was a bit weaker at minus 0.6%. What is happening at least in today’s session and yesterday’s is that FII money continues to come in. They have pumped in like ₹36,000–₹37,000 crores, and that is causing some stability in Nifty, while the rest of the market, where FIIs are not so active, are seeing some sell-off.

Nifty Mid and Small Cap

Midcaps sold off by 0.68%, but not too much, and small caps were down 1.79%. This is where the most damage happened today – in small caps and the micro caps.

Bank Nifty

Bank Nifty was also down half a percent, mainly led by SBI. SBI results are due and there is some caution ahead of that.

GOLD

Gold has been slammed down. Gold is down 2% for the day and as I mentioned yesterday, we look like we are coming towards the ₹90,900–₹92,000 mark soon.

Advance Decline Ratio

Market breadth was not good compared to yesterday or the previous day: 143 to 357 advance-decline ratio. So, poor advances.

Heat Maps

Heat maps were largely red, but big reds in Bajaj Finance, Bajaj Finserv and SBI. Some green in Maruti, Bharti Airtel, SBI Life, and a few other counters. HDFC Bank also contributed +1% to the mix. Nifty Next 50 was much more red.

Defense stocks, which were running up, cooled off today: HAL down 2.6%, DMart down 2.5%. Adani Power, Bajaj Holding, PNB, REC all seemed to be giving up some profits from recent gains. DLF, JSW Energy, Lodha Hyundai, IOC showed good results and were leading the range.

Sectoral Overview

Sectoral trends: Real estate did very well, up 1.9%. Many other sectors were nearly 2% down for the day. Capital market down 2.3%, defense down 1.8%, media down 2.2%, and PSU banks (led by SBI) down 2.2%. The rest of the sectors were largely flattish.

Sectors of the Day

Nifty Realty Index

Real estate is trying to make a comeback. It is down from the top quite a bit, but macro developers like Godrej Properties, DLF, Sobha, Raymonds all did very well in today’s session. They are off from the bottom, but there are no real big moves happening in real estate. It’s just that comparatively to other sectors, it did reasonably well today.

Story of the Day : Defense stocks and how trends suck people in on such moves.

The rising India-Pakistan tension has fired up the defense stocks. Can you see this very obvious correlation? That there’s talk of war and people jump to buy defense stocks. There may or may not be any direct correlation as such because it may just be a one or two-day operation. It may not result in any major change in defense orders. But somehow, the feeling that we are into a war and hence defense stocks have to do well—that narrative starts going up.

The geopolitics have heated the triggers. Massive gains have happened in defense stocks recently. Since March, defense stocks have been going up, but in the last two or three sessions itself, defense stocks have gained like 10%—in just two sessions since April 25th. But since March beginning, the move has been even more spectacular—almost 40%+ gains. We’ve had some fantastic gainers in Paras, Data Patterns, GRSE, Cochin Shipyard, Mazagon Dock (MasDoc), and so on. But several of them had been beaten down mercilessly before this run-up. So it is very difficult to switch from badly beaten stocks in this phase to suddenly newer stocks. Current rally is up 42%, making a new high, so very promising from that point of view.

From February to April 25th, you can see several of these stocks really doing very well. Some of them are in our strategies, but most of them have been booted out. GRSE, Paras, Solar Industries, Masdoc have all given more than 50% returns in that period. So a lot of folks, thematically, will rush into this. Perhaps the funds which are defense-focused will be pushed for new sales. What happened in the last rally was that when defense was peaking out, that’s when the new offerings came out and people were pushed to buy them at that point—in December 2024 to February 2025. Just in about two to two and a half months, we saw a massive loss in defense stocks, and this has now been fully recovered.

So, very, very difficult time because after a very sharp drop, if the sector goes up very sharply again, momentum strategies may take time to pick them up. This kind of high choppiness in sectors is very difficult to trade. During the correction, of course, you had stocks like Cyient, Zen Technologies, BEML give up 30–40% gains in just 2–3 months, and only very few stocks remained in the green or less impacted.

In the last five years, defense stocks have done really well. The five-year CAGR on some of these stocks is phenomenal: Mazagon Dock (112%), BEL (67%), BEML (40%), Astra Microwave (67%), Solar Industries, Bharat Dynamics, GRSE have all posted significant gains. Whether this new leg that is starting up will result in a durable rally upwards or not is yet to be seen. My sense is that if you are making new highs, there is likelihood that these stocks will go up higher. But whenever I see that there are stocks running up based on very immediate hot news, that possibly can be a concern.

But then you want to follow your strategy and also have your exits in place so that in case it’s a whiplash kind of rally, you will get out soon. The one-year, three-year, and five-year returns look great on some of them, although on the one-year chart, several of them are still in the red. So several stocks which performed well over three and five years have been taking a rest this past year.

As I was mentioning, it is very easy to get into FOMO if you’re not following the process. If you’re following the process, then yes, some stocks will do right, some stocks will flip you on the wrong foot, but you will get out of them also. But in case you are betting on these stocks based on the narrative, then you must get your house in order in terms of pre-deciding your exit. What if they don’t go the way you want them to? At what point will you be getting out? There have to be good stops in place.

For instance, in the run of MasDoc, which has clocked 112% in the last four and a half years, there have been several big falls—35%, 28%, 38%, 34%. It will not keep going up incessantly. There will come a time when some of these falls may become 50–70%, and then the stock may remain subdued for a long time. So knowing where to exit is very important. Each time when the rally is getting hot, you will see a lot of noise start to build up—not at the start of the rally, but at the peak. And that’s the wrong time to get into the stock.

Paras Defense also has done similar kind of CAGR. But look at the kind of moves: 170% up, then 65% fall, then 250% up, then 50% fall, and now we’re at the start of the next move. I don’t know whether this will go up or flop down. But if you’re getting into this, you must have stops in place.

Bharat Electronics did almost 13 years of nothingness and then went up 20x in 5 years. This is the kind of sustained rally that you want to let your winners keep running. So the momentum case study here is about how to automatically identify trends and how to exit when there’s weakness without giving any attention to FOMO or hype.

If stocks are going up, you are buying. If they’re coming down, you’re selling. You’re not really letting the narrative get into your head—why I am buying, why I am selling, or what the TV is telling me about the potential war or not. Without being greedy to capture the entire rally, we only want to take some parts of the rally.

For instance, in Mazagon Dock, strategy may have entered here, exited here, did it four or five times. In Hindustan Aeronautics, entered here, exited here and maybe hasn’t entered again yet. In Bharat Electronics, you just got this portion, but that was also a 100% gain. In Cochin Shipyard, you entered around ₹300–400, exited with a 100%+ gain, and that was the end of it.

So opportunistically using your capital at the right time and getting out—even losing some ground from the top—is ideal for playing sharp moving stocks. Timely entry when momentum builds—that’s what momentum strategies are designed to do. They don’t rely on news or hype. Entry happens when price strength is confirmed, reducing the risk of entering too early.

As long as a stock continues to show relative strength, you hold the position without emotion. You ride the bulk of the trend. Momentum investing uses clear-cut rules like ranking drops or moving average breaches to exit weakening positions, ensuring a major hit is unlikely. Diversification across 10–40 stocks also protects against mishaps in any one stock.

This helps avoid the trap of holding through deep corrections. Who knows when a sector will come back after a big drop? Given the kind of CAGRs we’ve seen in the last 3–5 years, I’m not sure how long they can sustain going forward, especially since many of these stocks are running far ahead of potential valuations. Momentum investing also eliminates emotional decisions. There’s no need to guess peaks or worry about missing the rally. Just follow the strategy. The logic handles entry and exit systematically, protecting against fear-based exits or greed-driven entries.

So, what has been your journey with defense stocks? I know a lot of folks got stuck last year when many new fund offerings in the defense sector came up, and not-so-familiar investors were pushed into them by distributors—without any exit plans. Now that these sectors have run up, you have a golden opportunity. If you didn’t want to be in this sector, you can now take a more measured approach, maybe diversify if you were concentrated. Who knows—defense may become a gigantic rally. I’m not ruling that out. I’m just saying: have your plan in place.

In this episode of the Momentum Podcast by Weekend Investing, we sit down with Sudheer , a software engineer from Infosys who shares his honest and inspiring investing journey—from early losses in derivatives and scams to his turnaround using Weekend Investing’s smallcases.

💡 Hear how Sudheer allocates ₹30,000/month, balances risk with gold, navigates market dips confidently, and the crucial mindset shift he learned through momentum investing.

👉 Don’t miss Sudheer’s powerful advice for new investors and the importance of discipline and long-term thinking.

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