Synopsis : With a 15% correction from June highs, the Nifty India Defence Index has entered oversold territory, triggering value-hunting interest among investors. Over 50% of its constituent stocks now have RSIs below 30—raising the big question: is this the perfect accumulation zone?
The Nifty India Defence Index, once the poster child of post-‘Operation Sindoor’ bullish sentiment, has hit a critical juncture. Following a stellar 35% rally after May’s geopolitical developments, the index has seen a sharp 15% correction, pushing its Relative Strength Index (RSI) to the lowest level since its inception. As of July 28, 2025, 50% of the stocks within the index are now in oversold territory, sparking debate over whether it's time to accumulate key defence names like Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL), and Garden Reach Shipbuilders & Engineers (GRSE).
The broader Indian equity market has been under pressure too, with the Sensex dipping below the 81,000 mark and the Nifty 50 breaking under 24,700. Despite this weakness, it’s the Defence Index that stands out for its steep fall. This underperformance is stark—while the Nifty 500 dropped 3.49% in July, the Defence Index plummeted by 11.65%.
This downturn follows a powerful rally that began on May 7, 2025, after India launched ‘Operation Sindoor’ in response to the Pahalgam terror attack. Defence stocks surged, with names like GRSE and Ideaforge Technology delivering returns of 63% and 55% respectively. The index peaked on June 6 at 9,195.15, before starting its descent.
Currently, key players like Ideaforge, Cochin Shipyard, BDL, and HAL are showing RSIs under 30, a classical technical signal of oversold conditions. Interestingly, the RSI for most of these names is now lower than it was during the volatile days following Operation Sindoor. The index is also trading below its 20- and 50-day moving averages, indicating sustained selling pressure.
Technical analysts caution that while RSI is a useful tool for identifying potential reversal zones, it should not be viewed in isolation. RSIs can remain low for extended periods in strongly trending markets. However, the Nifty India Defence Index is now testing a key Fibonacci retracement level—61.8% from its May-June rally—which could serve as a technical support.
Market watchers suggest that if the index forms a higher low and the RSI crosses above its 9-day moving average, it may mark the beginning of a trend reversal. Investors with a long-term outlook might find these levels attractive for staggered entries in quality defence stocks, given the sector’s strategic importance and strong order books.
In short, while catching a falling knife can be risky, the current correction in India’s defence stocks could also be offering a rare entry point—provided one exercises discipline and tracks confirmations of a trend change.
Disclaimer : This article is for informational purposes only and does not constitute investment advice. Please consult a certified financial advisor before making any investment decisions.
