For the past few days, defense sector stocks had been consistently weak in the stock market. These stocks had seen declines in seven out of approximately eight trading sessions. However, the beginning of this week presented a different picture. As soon as the market opened, major defense sector stocks saw a rise. Investors seemed to be returning to this sector once again, showing interest in buying.
The biggest beneficiary of this surge was Data Patterns' share, which traded around ₹2667, up nearly 4 percent in afternoon trading.
Which Stocks Saw the Most Action
The defense sector stocks that saw the most significant gains included:
- Data Patterns: Up nearly 4 percent
- Bharat Electronics: Jump of 2.92 percent
- Garden Reach Shipbuilders: Up approximately 3 percent
- HAL (Hindustan Aeronautics): Increased by 1.88 percent
- BEML: Gained 2.22 percent
Heavy buying was observed in these companies, indicating that investors' confidence in these firms remains intact.
Why the Rebound in Defense Stocks?
According to experts, the recent weakness in defense stocks was due to the high valuation of these companies and lower-than-expected quarterly results. In particular, giants like Bharat Electronics and Mazagon Dock delivered performances that caused some concern among investors.
However, there is also a perception in the market that after the recent fall, the valuations of these stocks have reached an attractive level. This is why investors are showing interest in them again.
Nifty Defence Index Rises
The Nifty India Defence Index, which had fallen by about 8 percent in the past week, also closed with a 2 percent gain on Monday. This clearly shows that not only a few select companies, but the entire sector saw positive movement.
This surge becomes even more significant when we see that there was not as much enthusiasm in the broader market, i.e., the other indices.
The Effect of Operation Sindoor Resurfaces
A major reason for the rise in the defense sector in the past few months was Operation Sindoor. India initiated this operation in April when there was a terrorist attack on tourists in Jammu and Kashmir. In this retaliatory action, several terrorist hideouts in Pakistan were damaged.
After this incident, defense stocks saw a b surge. Many shares jumped by 40 to 80 percent. It was believed in the market that after this operation, emphasis would increase on India's defense preparedness and budget, which would increase the order books of defense companies.
Some Stocks Still Under Pressure
However, amid this surge, there were some defense shares that closed in the red. These include names like Unimech Aerospace, Syient DLM, and Zen Technologies. These companies still saw selling pressure.
Experts believe that there is some uncertainty in the market regarding the business models or growth projections of these companies, due to which investors are still hesitant about them.
The Role of Budget and Policy Changes
Government policies play a very big role in the movement of the defense sector. In the current financial year's central budget, a large amount has been separately allocated for defense procurement. Apart from this, domestic defense companies are continuously receiving new orders due to initiatives like Make in India and Atmanirbhar Bharat.
The government's emphasis on self-reliance in defense production has increased. This is continuously benefiting companies like HAL, BEL, and BEML.
Foreign Investors Also Show Interest
A special feature of this sector is that it is also becoming a center of attraction for foreign investors, i.e., FIIs. Strong order books, government support, and continuous increase in the defense budget make it a safe sector for investment.
According to recent SEBI data, foreign institutional investors are continuously increasing their stake in defense stocks, especially in public sector companies.
