Defence stocks extended their rally for a second straight session today afternoon as investors continued to bid up the theme amid the ongoing West Asia conflict and a rising geopolitical risk premium.

The Nifty Defence Index was up over 3% in trade after gaining 2.5% in the previous session, with 17 constituents trading in the green, pointing to broad-based buying across the basket.

Within the pack, shipbuilders led the move. Mazagon Dock Shipbuilders climbed 6.92%, marking its strongest move in nine months, while Garden Reach Shipbuilders & Engineers (GRSE) rose 6.14%, placing both among the top gainers on the index. Bharat Electronics (BEL) also featured among the key gainers, extending the risk-on tone within defence manufacturing and electronics.

The near-term driver here is less about an immediate earnings change and more about how markets typically behave during periods of heightened conflict, capital rotates toward sectors where spending is perceived as “non-discretionary” and where order books provide multi-year visibility. Defence names also tend to attract incremental flows because investors expect procurement urgency, faster decision cycles and stronger budget prioritisation when geopolitical uncertainty rises.

This leg of the rally is headline- and flow-supported, which can keep momentum intact as long as West Asia developments remain elevated. But the next phase will hinge on tangible follow-through: fresh orders, faster contracting, and execution discipline (delivery timelines and working-capital management). If those positives show up in filings and order wins, the move can broaden and sustain; if not, these stocks often consolidate quickly once the immediate risk-premium trade fades.