Defence stocks declined on Tuesday as investors booked profits following gains in the previous two trading sessions, which were driven by the Defence Acquisition Council’s approval of capability enhancement proposals worth around ₹52,000 crore.The Nifty Defence index fell more than 2 per cent to an intraday low of 9,427.95.Most constituents traded in the red, with only Aequs and Zen Technologies bucking the trend. Apollo Micro Systems, Data Patterns, Mishra Dhatu Nigam, Paras Defence and Cochin Shipyard emerged as the top losers.Choice expects Q1FY27 to remain a seasonally soft quarterAccording to Choice Institutional Equities, Q1FY27 is likely to be a seasonally soft quarter for the Indian defence sector, with revenue recognition expected to remain back-ended towards the second half of the financial year, particularly the fourth quarter.The brokerage said the key challenge continues to be the gap between strong order inflows and revenue conversion, resulting in delayed earnings translation despite a robust demand environment. It noted that the trend was evident in Q4FY26, when revenues remained largely flat despite healthy order momentum.Choice Institutional Equities said near-term revenue visibility remains constrained by execution bottlenecks, including delayed clearances, milestone-based billing and supply chain dependencies, rather than any weakness in demand. It added that most companies have entered FY27 with robust order backlogs and improving production readiness, indicating that the timing of execution remains the primary challenge.The brokerage expects meaningful divergence in Q1FY27 performance depending on programme-specific execution timelines.Choice Institutional Equities said Q1FY27 is expected to be a transitional quarter. “While reported earnings may remain subdued, underlying execution momentum is gradually building, with clearer visibility on recovery expected as conversion accelerates through the year, particularly into H2FY27,” it said.The brokerage reiterated Bharat Electronics, Bharat Dynamics and Garden Reach Shipbuilders & Engineers as its preferred picks.Published on July 7, 2026