Defence Sector Update: India-Israel Strategic Pact Defence stocks have witnessed a significant surge, with key players gaining up to **5%** following reports of a landmark bilateral agreement. The rally is driven by Prime Minister Narendra Modi’s high-profile visit to Tel Aviv on **February 25-26, 2026**, where a comprehensive defence framework is being finalized. Market Performance and Indices The **Nifty India Defence Index** reflected the bullish sentiment, trading near the **8,066** mark. Despite broader market volatility, the sector has maintained a **51.75%** return over the past **12 months**. **Bharat Electronics Limited (BEL)** saw its share price rise to approximately **₹439**, supported by a robust order book exceeding **₹74,453 crore**. **Hindustan Aeronautics Limited (HAL)** also experienced increased investor interest, trading around **₹3,985** as markets price in potential long-term manufacturing contracts. Technology Transfer and Indigenous Shields The core of the new pact focuses on an unprecedented **Transfer of Technology (ToT)** rather than simple equipment purchases. This shift aligns with the "Make in India" initiative to develop the **Sudarshan Chakra**, a multi-layered pan-India air defence shield. Key systems under discussion include the **Iron Dome** for short-range threats and the cutting-edge **Iron Beam** laser system. The Iron Beam is noted for its extreme cost-efficiency, estimated at just **$2 per shot**, offering a solution to the economics of drone and missile attrition. Strategic Infrastructure and Offensive Systems Collaboration is expected to extend beyond defensive shields. Discussions include the co-development of: * **Long-range missiles:** Technology for the **Arrow** and **David’s Sling** systems. * **Precision Munitions:** Integration of **Air LORA** supersonic missiles and **Rampage** air-to-ground systems with India's Sukhoi-30MKI fleet. * **Aerial Refuelling:** Modifying commercial aircraft into mid-air refuellers for the IAF and Navy. Economic Impact Beyond security, the visit has triggered the final rounds of an **India-Israel Free Trade Agreement (FTA)**. With bilateral merchandise trade reaching **$3.62 billion** in the **2024-2025** period, the FTA is expected to further scale industrial cooperation in the aerospace and electronics sectors.