Defence-Related Stocks, Get Indigenisation Boost

Shares of companies related to the defence sector are sailing northwards, with the government's efforts to indigenise more defence equipment as well as boost their exports energising investor sentiment. The 'Fourth Positive Indigenisation List' of 101 defence items was announced by Prime Minister Narendra Modi on Wednesday, which also means that domestic players related to the multi-billion dollars worth defence segment, will have increased business opportunities.

An analysis of the stocks of companies that have businesses related to the defence space showed that most of them have gained since Wednesday. Mazagon Dock, Bharat Dynamics, Cochin Shipyard, Mishra Dhatu Nigam, Bharat Electronics, Bharat Forge, Astra Microwave Products and Paras Defence and Space Technologies, are among the companies that have gained as much as 5 per cent in two trading days, Wednesday and Thursday.

Analysts opined that broadly defence related stocks have been outperforming and are expected to continue to deliver good returns for investors. Since the end of trade on October 18 till the close on October 20, shares of Mazagon Dock rallied 5.39 per cent and BEML jumped 4.43 per cent on the BSE. Similarly, Bharat Dynamics climbed 3.32 per cent, Cochin Shipyard gained 2.82 per cent, Mishra Dhatu Nigam Ltd advanced 2.18 per cent and Bharat Electronics went higher by 1.93 per cent during the period.

The stock of Bharat Forge gained 1.44 per cent, Astra Microwave Products spurted 0.84 per cent and Paras Defence and Space Technologies (0.26 per cent) in the last two days. Meanwhile, a few stocks remained muted. Shares of Data Patterns (India) fell 3.86 per cent and Hindustan Aeronautics dipped 1.18 per cent during the period under review. On Friday morning, however, most of the stocks were trading on a mixed note, while Bharat Dynamics climbed 2.76 per cent and Paras Defence gained 0.35 per cent higher.

The benchmark 30-share BSE Sensex was trading 266.77 points or 0.45 per cent higher at 59,469.67 in the morning trade on Friday. Defence stocks have been performing very well over the past three months. These lists improved the visibility of revenues for most defence-related companies and the government has also given a lot of orders to these companies to boost indigenisation, Deepak Jasani, Head of Retail Research at HDFC Securities, said.

The theme of defence can continue to perform well given the high revenue visibility over multiple years. However, some consolidation/ correction can be expected post the sharp rise seen lately, he noted. Conglomerates Reliance, Tata, Adani and L&T also have presence in the defence segment. "In the last one year, defence sector related stocks have outperformed and they will continue to deliver good returns...

companies like BEL, Hindustan Aeronautics, Bharat Dynamics, Mazagon Dock, Cochin Shipyard are likely to get more orders from the defence ministry. Thereby, their earnings will also improve," Gaurang Shah, Senior Vice President at Geojit Financial Services, said. Ashwin Patil, Senior Research Analyst at LKP Securities, said the dependence on developed nations is reducing day by day and is providing easy availability and margin support for the Indian defence sector.

The Ministry of Defence (MoD) has taken numerous steps to achieve 'Aatmanirbharta' in defence and Positive Indigenisation Lists is one of the landmark initiatives towards achieving that vision. The 'Fourth Positive Indigenisation List' of 101 items was announced by the Prime Minister on October 19. "All the items included in the lists will be procured from indigenous sources as per provisions given in Defence Acquisition Procedure (DAP) 2020. This list provides continuous impetus towards self-reliance in defence," MoD said in a release on Wednesday. MoD had earlier promulgated 'First, Second and Third Positive Indigenisation Lists', comprising 310 items on August 21, 2020, May 31, 2021 and April 07, 2022 respectively.

(PTI)