Indian stock market is set for heightened activity as defense stocks take center stage following the Defense Acquisition Council’s (DAC) meeting on Friday. With the disbursement of a substantial ₹80,000 crore order, investors are poised to keep a close watch on Monday’s trading, anticipating significant movements in this sector.
When the Indian stock market reopens on Monday, Dalal Street bulls are anticipated to shift their focus towards defense companies with robust CAPEX, as suggested by stock market experts. Value buying is expected to drive interest in the defense segment, with investors eyeing potential opportunities for growth.
Commenting on the impact of the DAC meeting outcome on the Indian stock market, Amit Goel, Co-Founder and Chief Global Strategist at Pace 360, stated, “The recent military order of ₹80,000 crores signifies a substantial year-over-year increase in military spending. This amount, comprising 13% of the military sector’s budget for FY 24–25, is in line with the government’s Long-Term Integrated Perspective Plan and Atmanirbharta campaign.”
Rajesh Sinha, Senior Research Analyst at Bonanza Portfolio, highlighted the potential beneficiaries from the DAC meeting outcome, stating, “Defence PSUs such as Bharat Electronics Ltd. (BEL), Hindustan Aeronautics Ltd. (HAL), Bharat Dynamics Ltd. (BDL), etc., are poised to emerge as the primary beneficiaries of the approved project worth ₹84,560 crore.”
Sinha further elaborated that in December 2023, DAC’s initial approval of defence acquisition projects amounting to Rs. 2.23 lakh crore included the procurement of 97 Tejas light combat aircraft and 156 Prachand combat helicopters. This significant move is expected to substantially enhance the combat capabilities of the armed forces.”
In terms of defense shares to consider for Monday, a Pace 360 expert noted, “Defence-related stocks, particularly HAL and BEL, are poised for potential gains given their robust order books and efficient delivery capabilities. Both companies have solid capital expenditures in place, which further augments their investment appeal. Notably, BEL’s strategic diversification plans into sectors like metro, railway, and artificial intelligence offer a compelling investment opportunity, especially when compared to the relatively overvalued HAL. Moreover, BEL’s involvement in supplying equipment for significant ship-building programs like the Next Generation Offshore Patrol Vessel, Next Generation Missile Vessels, and cadet training ships, adds to its growth prospects.”
Manish Chowdhury, Head of Research at StoxBox, expressed optimism regarding the HAL share price, stating, “HAL’s share presents a favorable and long-term opportunity amidst the expanding capex and modernization of India’s air defense system. Benefiting from industry tailwinds, including the government’s emphasis on indigenous defense procurement, coupled with HAL’s inherent strengths such as a robust order book and enhanced profitability driven by economies of scale and operating leverage, positions it as a compelling investment story from a long-term perspective.”
Regarding the outlook for BEL shares, the StoxBox expert stated, “BEL is poised to play a pivotal role in the Make in India and AtmaNirbhar Bharat initiatives, leveraging its strong execution capabilities, robust manufacturing and R&D infrastructure, solid balance sheet, and healthy return ratios. These factors position BEL for potential growth and sustainability in the current market landscape.”
Disclaimer: The views and recommendations expressed above are solely those of individual analysts, experts, and broking companies, and do not necessarily reflect the opinions of Bystox. Investors are strongly advised to consult certified financial experts or professionals before making any investment decisions.