India’s precision military action under Operation Sindoor on May 7 didn’t just shake up the battlefield, it rattled the stock markets too.

Indian defence stocks went on a tear, surging as much as 18% following the successful strikes on terror hubs in Pakistan and Pakistan-occupied Kashmir (PoJK). The Nifty Defence Index led the charge, outperforming the broader market and echoing past trends seen after key military operations.

Meanwhile, Chinese defence companies faced the heat — and not in a good way. As India and Pakistan reached a ceasefire agreement by May 10, the hype around Chinese arms exports to Pakistan fizzled out. Chinese defence stocks — which had just rallied on hopes of supplying weapons to Islamabad — nosedived by up to 9%.

This sharp reversal hit some major names:

• AVIC Chengdu Aircraft dropped 9.2%
• Zhuzhou Hongda Electronics Corp, maker of PL-15 missiles, fell 6.5%
• The Hang Seng China A Aerospace & Defence Index slipped nearly 3%

Just a day earlier, on May 8, these same stocks were flying high — AVIC Chengdu’s shares were up 16%, AVIC Aerospace gained over 6%, and Zhuzhou Hongda saw solid gains on rising speculation that China would ramp up military support to Pakistan if tensions escalated.

Instead, India’s swift and tech-driven response not only halted the momentum of potential Chinese arms deals, but also cast doubt on the reliability and effectiveness of that foreign-supplied gear. The ceasefire dampened expectations of a prolonged conflict, and investors quickly bailed out of Chinese defence counters.

Back home, however, India’s defence sector is riding a wave of confidence. This isn’t the first time — following the 2016 Uri surgical strikes, Bharat Electronics Ltd (BEL) soared over 50% in six months. In 2019, after the Pulwama-Balakot escalation, HAL jumped 25%, and BEL rose 40%.

With the Nifty Defence Index showing an 18% gain versus Nifty 50’s 8% rise in the past month, it’s clear the markets see strength — both militarily and financially — in India’s growing indigenous defence capabilities