Following the Pahalgam incident, the tension between arch-rivals India and Pakistan escalated, which led to cross-border airstrikes. During this confrontation, the news of three French-origin Rafale in the Indian inventory shot down by the Pakistan Air Force (PAF) led to an immediate stock drop of Dassault Aviation, the manufacturing company of Rafale fighter jets. In contrast, the shares of China’s Chengdu Aircraft Corporation, the manufacturer of JF-17 and J-10 in Pakistan’s inventory, surged. This stock fluctuation indicates that the performance of these aircraft in active combat has a direct impact on investor sentiments. This development also made the $7.4 billion deal between India and Dassault Aviation in April questionable. 

Will India’s Deal with Dassault Aviation be Re-evaluated?

 India currently possesses 36 Rafale fighters, and under the newly signed deal, India was aiming to buy 26 Rafale fighter jets from Dassault Aviation, which would be delivered by 2030. Now three Rafale fighters have been shot down, the potential of these jets in strengthening India’s defence capabilities and its vision to diversify its defence procurement away from conventional suppliers, Russia and the USA, to other countries requires re-evaluation. 

Dassault Aviation Stock Fluctuation 

As of May 7, Dassault Aviation’s stock traded at  €320.20. The market opened at €326.80, but the stocks showed volatility throughout the day with a decrease of €4.40 (−1.36%) from the previous close of €324.60. This drop indicates that investors reacted negatively to the news of three Rafale jets being shot down. 

However, the company still holds the market cap of  €24.98 billion, indicating that the company sustains its position as a major player in the aviation industry. Meanwhile, the stocks traded at €332.20, trading near its 52-week high, far above the low of €160.90, suggesting that the long-term performance of the company is strong despite the recent drop. 

Chengdu Aircraft Corporation Stocks Soar 

In contrast to the French Aviation company, the Chinese Chengdu Aircraft Corporation showed a stock rise of 16 percent on Shenzhen-listed stocks, after India-Pakistan air strikes. This rise was the highest since last October. This stock rise is attributed to the company’s aircraft used by the PAF. Although defence analysts are skeptical about the specific aircraft used by PAF in the recent strikes, the findings of Stockholm International Peace Research Institute (SIPRI) indicates that over 60% of Chinese arms export went to Pakistan between 2020 to 2024, therefore the chance of PAF using Chinese origin aircraft are very high that may had brought the confidence of the investors in Chinese defense manufacturers.  According to Seth Jones, president of the defence and security department at the Centre for Strategic and International Studies (CSIS)

“It’s certainly likely that Pakistan used Chinese aircraft”

As there is no confirmation from both the rival countries about the number and aircraft shot down, it is expected that the stock fluctuation was temporary. Dassault Aviation has a strong market hold in the aviation industry,  it will continue to show growth if the news of Rafale being shot down is invalidated. However, if there comes confirmation from IAF or the tension between both countries escalates, leading to more shooting down of Rafale, there would be an expected decline in Dassault Aviation. The performance of  Chengdu Aircraft Corporation is also expected to be inversely proportional to Dassault Aviation if the news of Chinese aircraft used by the PAF matures.