Following India's "Operation Sindoor" on May 7, 2025, which targeted alleged terrorist infrastructure within Pakistan and Pakistan-administered Kashmir, both Indian and Chinese defense stocks experienced notable market reactions. The operation, a response to the April 22 Pahalgam attack in Indian-administered Kashmir, which resulted in the deaths of 26 Indian tourists and was attributed to Pakistan-based militant groups, has seemingly created ripples across the স্টক মার্কেট.

In India, the immediate aftermath of Operation Sindoor saw a mixed response in the defense sector. Initially, some defense stocks surged, with companies like Mazagon Dock Shipbuilders experiencing gains of up to 4%. Hindustan Aeronautics (HAL) also saw a rise of 1.8% to Rs 4,589, while Cochin Shipyard jumped 2% to Rs 1,511, and Bharat Dynamics gained 1.7%. This rally reflected investor confidence in the sector following the display of India's military capabilities and the potential for increased defense spending.

However, this initial enthusiasm was met with caution as the trading day progressed. Shares of Bharat Dynamics, Hindustan Aeronautics, Bharat Electronics, and BEML fell by up to 6.12%. Shipbuilding stocks such as Mazagon Dock Shipbuilders, Garden Reach Shipbuilders, and Cochin Shipyard followed a similar trend, declining up to 5%. Consequently, the Nifty Defence index experienced a drop of nearly 2%, falling to the 6915 level.

Market experts suggest that this downturn could be attributed to profit-booking after a significant run-up in defense stocks following the Pahalgam terror attack. Investors may have been taking gains off the table amidst heightened geopolitical tensions. Some analysts adopted a wait-and-see approach, considering the geopolitical risks and potential escalation of conflict.

Despite the volatility, some experts believe that Operation Sindoor could positively impact defense companies in the long term. Dr. Vikas Gupta, CEO & Chief Investment Strategist at OmniScience Capital, suggested that the operation is likely to put the focus on the pace of execution in the Defence companies. These companies are likely to be given aggressive execution targets which are likely to start becoming visible in a few quarters and 1-3 years' time line, thus possibly boosting revenues and earnings forecast. He added that companies operating in other dimensions of Defence, such as cyber security, strategic minerals & rare earths, oil & gas, hydro-projects, military EPC, military logistics and railways are also likely to see execution at a higher pace.

Across the border, the situation in Chinese markets presented a contrasting picture. While specific data on the performance of individual Chinese defense stocks immediately after Operation Sindoor is limited in the available context, reports indicate a jump of up to 36% in Chinese defense-related stocks. This surge occurred amidst escalating tensions between India and Pakistan following India's operation.

China has reacted to India's strikes with caution. The Chinese foreign ministry termed the military action as "regrettable" and urged both India and Pakistan to exercise restraint. The ministry reiterated China's consistent stance against all forms of terrorism, and called upon both sides to remain calm to avoid escalating the situation.

The differing market reactions in India and China can be attributed to several factors. In India, the initial surge was tempered by profit-booking and concerns about regional instability. The Indian government's clarification that the strikes were non-escalatory and targeted only terrorist infrastructure might have also contributed to a more measured response. In China, the rise in defense stocks could be linked to perceptions of increased regional instability and potential opportunities for Chinese arms exports.

Operation Sindoor has brought attention to the strategic importance of the defense sector in both India and China. While the immediate market impact has been varied, the long-term implications for defense spending, technological advancements, and geopolitical strategies in the region remain significant.