Indian Stock Market Roars Back: Nifty Surpasses 25,600 in February 2026 Rally, Defense Stocks Surge

Indian Stock Market Roars Back: Nifty Surpasses 25,600 in February 2026 Rally, Defense Stocks Surge

The Indian equity market is demonstrating a significant turnaround in February 2026, with the Nifty 50 index decisively surpassing the 25,600 mark, signaling a strong recovery trend after a period of volatility. This renewed investor confidence is fueled by improving macroeconomic indicators and a positive earnings trajectory, with market experts predicting a robust performance throughout the year. Leading the charge in this resurgence are key stocks like Bharat Electronics Limited (BEL) and Hindalco Industries, alongside a buoyant defense sector responding to escalating geopolitical tensions. Meanwhile, Vodafone Idea, Ola Electric, and Easy Trip Planners emerged as the top-traded stocks on the National Stock Exchange (NSE), reflecting diverse investor interest. The rally, however, comes as the Indian IT sector grapples with global market weaknesses and the transformative impact of Artificial Intelligence (AI), while specific companies like Godfrey Phillips saw their shares slip following a previous strong run. FinScann’s in-depth analysis delves into these critical market movements and the Q3 FY26 performance of leading recycling firms.

The Catalyst

The current market buoyancy is a confluence of several factors. Global financial institutions like Morgan Stanley anticipate a strong recovery for Indian markets in 2026, projecting a 13% upside in the BSE Sensex through December. This optimism follows a relatively weaker performance in 2025 for broader markets, setting the stage for a potential "inflection year" where earnings growth is expected to accelerate. Domestically, sustained institutional flows, sector-specific rallies, and a robust Union Budget 2026-27, which saw a 15% year-on-year increase in defense allocation to ₹7.85 lakh crore, are providing significant tailwinds. Furthermore, geopolitical developments, particularly rising tensions globally, have triggered a sharp rally in defense-related stocks, making them a "safer bet" for investors.

Financial Forensics

The Nifty's push past 25,600 reflects broad-based buying interest. Midcap and smallcap indices are also expected to outperform, suggesting a widening of the market rally beyond large-cap stocks.

Top Traded Stocks on NSE Among the most actively traded stocks, Vodafone Idea garnered significant attention, despite operating in a high-risk, high-reward environment. The company reported a 1.9% quarterly revenue growth, but faces substantial debt amounting to ₹2,50,166.69 crore against a Q2 FY25 cash balance of ₹14,223.09 crore. Analysts maintain a "Neutral" consensus, with an average 12-month price target of ₹9.88 and a high estimate of ₹15.1.

Ola Electric, a prominent player in the EV space, continues to be a hot topic, with market participants closely watching for updates on its much-anticipated IPO, which is expected to galvanize interest in the broader EV and tech startup ecosystem.

Online travel aggregator Easy Trip Planners recorded a challenging Q3 FY26, with consolidated net profit plummeting by 96.8% year-on-year to ₹1 crore. While its 5-year revenue growth remains strong at 27.22%, net income growth lagged the industry. The company's market capitalization stands at approximately ₹3,356.8 crore, with a 25.3% decline over the past year. Concerns also exist around a 26.1% pledge on promoter holdings and a 27.2% decrease in promoter holding over the last three years.

Defense Sector Soars The defense sector is a standout performer, with companies like BEL and Hindustan Aeronautics Limited (HAL) leading gains. BEL, a leader in defense electronics, radars, and communication systems, benefits from a robust order book and increasing export potential. The government's strong emphasis on "Make in India" and "Atmanirbhar Bharat" initiatives, coupled with an ambitious target of achieving a ₹1.75 lakh crore turnover in aerospace and defense manufacturing by 2026, underpins this growth. Geopolitical tensions further amplify demand for indigenous defense equipment, translating into larger contracts and improved revenue visibility for these firms.

Indian IT Sector Headwinds In contrast, the Indian IT sector faces significant headwinds. Global market weakness and the rapid advancement of Artificial Intelligence are posing substantial challenges. Large-cap IT companies, in particular, are grappling with margin pressures as they increasingly rely on third-party AI tools due to a lag in developing proprietary solutions. Reports indicate a slowdown in revenue growth for listed IT companies, with Jefferies noting a 1.6% growth in Q2 FY26. The government, however, is actively working with academia and industry to upskill and reskill the IT workforce, aiming to mitigate job displacement and foster new opportunities in AI consulting and data engineering.

Godfrey Phillips India Shares of Godfrey Phillips India experienced a slip after a period of strong rally, likely due to profit booking following recent price hikes and market readjustments. Specific details regarding the extent of the slip or its precise triggers were not immediately available, but such movements are common for stocks that have seen rapid appreciation.

Recycling Sector Q3 FY26 Performance: A Tale of Two Companies

The third quarter of Fiscal Year 2026 (October-December 2025) presented a mixed bag for India’s recycling sector, highlighting both robust growth and significant challenges.

Gravita India Limited demonstrated impressive performance in Q3 FY26, reporting a consolidated net profit jump of 25.42% year-on-year to ₹97.70 crore. The company’s revenue from operations also saw a healthy increase of 2.11% to ₹1,017.00 crore. This strong growth was underpinned by expanded EBITDA margins, reaching 11.80%, up from 8.14% in the previous year, indicating enhanced operational efficiency. Gravita's strategic "Vision 2029" plan, aiming to expand recycling capacity to over 7 lakh metric tonnes per annum (MTPA) by FY28 and diversify into new verticals like lithium-ion battery, paper, and steel recycling, continues to drive its long-term growth trajectory.

In stark contrast, Eco Recycling Limited faced a challenging quarter, with consolidated net profit plummeting by 59.71% year-on-year to ₹1.97 crore (from ₹4.89 crore in Q3 FY25). The company’s net sales experienced a substantial decline of 40.42% year-on-year, falling to ₹5.91 crore. This sharp contraction, the lowest quarterly revenue in over two years, raises concerns about the sustainability of its business model and demand within the e-waste recycling sector. EBITDA also decreased by 46.83% to ₹3.52 crore, and the EBITDA margin compressed from 67.10% to 58.71%. The company's tax rate spiked dramatically to 51.54%, further eroding profitability. Over the past year, Eco Recycling's stock has declined by 45.18%.

Comparative Recycling Sector Performance (Q3 FY26)

Metric	Gravita India Limited	Eco Recycling Limited
Net Profit (₹ Cr)	97.70 (+25.42% YoY)	1.97 (-59.71% YoY)
Revenue (₹ Cr)	1,017.00 (+2.11% YoY)	5.91 (-40.42% YoY)
EBITDA (₹ Cr)	120.00 (+47.97% YoY)	3.52 (-46.83% YoY)
EBITDA Margin (%)	11.80% (vs 8.14% Q3 FY25)	58.71% (vs 67.10% Q3 FY25)
YTD Stock Perf. (1 Yr)	(Share price fell 29.35% in 1 year as of Jan 2026, 5-year return 1892.88%)	-45.18%
Key Initiatives	Capacity expansion (7L MTPA), Li-ion, paper, steel recycling	(New Company Secretary appointed)
Source: FinScann Analysis based on company reports and market data.

Market Impact

The broader market recovery, with the Nifty crossing 25,600, instills a positive sentiment for investors. This momentum is likely to favor sectors with strong underlying fundamentals and government support. The defense sector is expected to maintain its upward trajectory due to consistent government orders and export potential. However, the challenges in the IT sector, particularly for large-cap players, necessitate a cautious approach, with focus shifting to companies adept at AI integration and value-added services. The recycling sector's divergent performance highlights the importance of company-specific analysis, with robust players like Gravita India offering attractive growth prospects.

Key Takeaways for Investors

• Broad Market Optimism: The Nifty's rally above 25,600 and predictions of strong recovery in 2026 suggest a favorable environment for Indian equities. Consider a diversified portfolio with an eye on mid and small-cap segments for potential outperformance.
• Defense Sector as a Strategic Bet: Geopolitical tensions and government impetus make defense stocks a strong long-term play. BEL and HAL remain key beneficiaries.
• Caution in IT: While AI presents opportunities, large-cap IT firms face immediate margin pressures. Look for companies focusing on niche AI solutions, upskilling, and value-chain migration.
• Recycling Sector Divergence: Perform thorough due diligence. Gravita India shows strong growth and strategic expansion, while Eco Recycling's Q3 performance signals significant operational challenges.
• High-Volume, High-Risk: Stocks like Vodafone Idea carry inherent risks due to substantial debt, demanding careful risk assessment despite high trading volumes.

FinScann Verdict

The Indian stock market's robust recovery in February 2026, marked by the Nifty's push past 25,600, signals a compelling investment landscape for the year ahead. While the defense sector shines amid strategic government initiatives and global tensions, the IT sector's navigation of AI disruption will be crucial. Investors should prioritize fundamentally strong companies with clear growth catalysts, such as Gravita India in the recycling space, and maintain vigilance on high-risk, high-volume plays.

Disclaimer: For information only; not investment advice. Stock market investments carry risks. Please consult a SEBI-registered advisor before investing. FinScann assumes no liability for decisions made based on this report.