India’s largest defence company, Hindustan Aeronautics Limited (HAL), may face selling pressure after a fatal crash involving a Tejas aircraft at the Dubai Air Show on Friday. HAL shares closed nearly 3% lower at Rs 4,593 apiece, with the impact of the crash weighing on other defence stocks as well.
Harshal Dasani, Business Head, INVasset PMS, said that the market was quick to react to the Tejas Mk-1A crash at the Dubai Air Show, and the sentiment shift around HAL was understandable.
“When a frontline indigenous fighter suffers an accident on a global stage, it triggers immediate questions on reliability, export readiness, and operational safety. Even though the government clarified that earlier concerns around oil leakage were unfounded and unrelated, the incident still places HAL under heightened scrutiny at a time when expectations are exceptionally high,” stated Dasani.
HAL enters this phase with one of the strongest order books in the company’s history, including the recent mega order for 97 Tejas units and ongoing demand for helicopters and engines. Owing to its mega orderbook and sharp rise in financials, shares of HAL have risen nearly 1100% in the last five years.
“HAL stock was priced for perfection. Trading at elevated valuation multiples, the market was assuming flawless execution and uninterrupted momentum in India’s defence-manufacturing push. An incident like this doesn’t change the long-term trajectory, but it does introduce short-term reputational risk, and investors typically move to reassess risk-reward when valuations are rich,” said Dasani.
He added that the key now is the outcome of the investigation and the speed at which HAL and the defence establishment communicate technical clarity.
The Dubai incident marks the second crash involving a Tejas aircraft in less than two years. The first occurred in March 2024 near Jaisalmer, Rajasthan, when a fighter jet crashed while returning from a tri-services military exercise in the Pokhran desert.
A senior analyst at a leading brokerage expects HAL shares to open lower on Monday, citing negative sentiment following the Tejas crash. “Much will depend on the outcome of the investigation. If no major technical issue is found and deliveries remain on track, HAL shares would recover. However, if the crash leads buyers to reconsider orders and affects future deliveries, sentiment may remain weak for some time,” the analyst said on condition of anonymity.
Tejas is a single-engine, 4.5-generation multirole combat aircraft with a delta wing design. It is developed by the Aeronautical Development Agency (ADA) and manufactured by state-run Hindustan Aeronautics Limited (HAL) for the Indian Air Force (IAF).
"An IAF Tejas aircraft met with an accident during an aerial display at the Dubai Air Show today. The pilot sustained fatal injuries in the accident. Indian Air Force deeply regrets the loss of life and stands firmly with the bereaved family in this time of grief. A court of inquiry is being constituted to ascertain the cause of the accident," said the Indian Air Force.