Defence stocks like Hindustan Aeronautics (HAL), Bharat Dynamics (BDL), Bharat Electronics (BEL), and others saw significant gains on June 28 after the government extended the exemption of customs duty on imports of certain parts. This extension, initially set to end on July 1, has been extended for five years until 2029, bringing a wave of optimism and confidence among investors. It covers items such as military helicopters weighing over 3,500 kg, related role equipment, ground support equipment, and ground handling equipment.
Under the leadership of the Modi government, the defence sector has witnessed significant growth. The government’s focus on increasing funding, expanding budgets, and boosting defence exports has not only enhanced the sector’s potential but also instilled confidence in investors. The Union Budget 2019, presented by Finance Minister Nirmala Sitharaman, further reinforced this commitment by proposing the exemption of customs duty on defence equipment not manufactured in India.
Defence stocks have garnered significant attention, driven by optimism surrounding public sector undertakings (PSUs) and expectations of securing more orders in the medium to long term. Earlier this month, Defense Minister Rajnath Singh announced a target to increase India’s defence exports to Rs 50,000 crore by 2029. The country achieved a record-high defence export figure of Rs 21,083 crores in the Financial Year 2024.
According to a note from Anand Rathi Shares and Stock Brokers, India’s defence and aerospace industry market is projected to grow to $11.8 billion by 2029. The private sector’s defence production share has reached an eight-year high of 22 per cent.
For the Indian Army, the brokerage identified Bharat Dynamics, BEML, and Mishra Dhatu Nigam (MIDHANI) as key players, each playing a strategic role in the defense landscape. Similarly, shipbuilders like Mazagon Dock, Garden Reach, and Cochin Shipyard were listed as crucial for the Navy, underlining their significant contributions. On June 28, shares of HAL, BEL, and BDL traded over 1 per cent higher in morning deals, with Paras Defence and BEML stocks also showing gains. Shipping stocks were trading higher, with gains of up to 3 per cent.
Over the past 12 months, shares of most Indian defence companies have risen between 50 and 100 per cent or more, significantly outperforming the benchmark Nifty 50, which saw an increase of around 27 per cent during the same period. This robust performance not only reflects the current strength of the Indian defence industry but also hints at a promising future for potential investors.
According to Antique Stock Broking, the Indian defence sector has undergone significant transformations over the past four years, driven by the government’s revolutionary steps to establish a robust domestic defence ecosystem. The Ministry of Defence (MoD) is focused on fostering this ecosystem through several initiatives.
Anticipating robust growth, the brokerage has revised its target prices for defence stocks: BEL’s target price has been raised to Rs 339 from Rs 308, maintaining a ”buy” rating, and HAL’s target price has been increased to Rs 6,145 from Rs 5,462, also with a ”buy” rating.
Mazagon Dock Shipbuilders received a ‘buy’ rating, with the target price adjusted to Rs 3,458 from Rs 2,833. BEML was also upgraded to a ‘buy’ rating, with its target price raised to Rs 5,216 from Rs 3,510.
Team BharatShakti
