27-05-2025
BEL, HAL to Mazagon Dock: Defence stocks rise after Rajnath Singh's nod for 5th generation fighter planes
Defence stocks in focus: Defence stocks, which are already flying high so far this month, witnessed a further leg up on Tuesday, May 27, rising as much as 10% after the government approved the Advanced Medium Combat Aircraft (AMCA) Programme Execution Model.
The rise in defence stocks also added to the gains in the Nifty India Defence index, driving it higher for the fifth straight session. The 18 stocks pack added over 1% to hit a fresh record high of 8,728.20 in intraday trade today. So far this month, the index has gained 21%, adding to 11.5% rally seen in April and a 25% jump recorded in March.
Garden Reach Ship Builders shares were among the top gainers, rising nearly 5%. Bharat Dynamics, Mazagon Dock, Hindustan Aeronautics and Bharat Electronics (BEL) gained between 0.5% to 3% in intraday deals.
Defence Minister Rajnath Singh on Tuesday approved a framework for building the country's most advanced stealth fighter jet. This development holds significance against the backdrop of growing military conflict with Pakistan.
According to Ministry of Defence's statement, the recent approval will provide a significant push towards enhancing India's indigenous defence capabilities and fostering a robust domestic aerospace industrial ecosystem.
India will partner with a domestic firm for the stealth fighter programme, and companies can bid independently or as a joint venture, the defence ministry said in a statement, adding that the bids would be open for both private and state-owned firms.
The project is crucial for the Indian Air Force, whose squadrons of mainly Russian and ex-Soviet aircraft have fallen to 31 from an approved strength of 42 at a time when rival China is expanding its air force rapidly, said a Reuters report. Pakistan has one of China's most advanced warplanes, the J-10, in its arsenal.
Investor sentiment toward defence stocks has remains strong, buoyed by expectations of increased government spending in the sector amid rising tensions with Pakistan. Additionally, March quarter earnings from defence companies have largely met analysts' forecasts, lending further support to the ongoing rally on Dalal Street.
The renewed interest in defence counters—after a period of relative quiet—was sparked by India's recent airstrikes on terror camps in Pakistan and Pakistan-occupied Kashmir (PoK) on May 7.
The operation, dubbed 'Operation Sindoor,' showcased the capabilities of India's indigenously developed defence systems, which not only took out key airbases across the border but also intercepted enemy drones and missiles with precision.
According to analysts at IIFL, as quoted by Bloomberg, the sector could outperform others, with strong order visibility and positive sentiment helping sustain premium valuations. Besides increased spending on defense locally, global budgets too are growing, creating export markets for Indian companies, they say. Bharat Electronics is IIFL's top pick by virtue of having the best execution track record among state-owned companies, the Bloomberg report added.
(With inputs from agencies)
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