In a strategic move to enhance India’s defence capabilities and infrastructure, the Defence Acquisition Council (DAC) authorized contracts on Friday, February 16, totaling over Rs 84,560 crore. A report from brokerage house Nuvama Institutional Equities highlighted that the Ministry of Defence took a tactical approach based on valuable lessons learned.
The report emphasized that private players across the defence value chain are poised to benefit by becoming tier 2/3 component suppliers, with Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL), and Bharat Dynamics Ltd emerging as the main beneficiaries.
Nuvama’s report revealed that India has been closely studying and adapting strategies employed in recent conflicts in Russia, Israel, and Armenia. These strategies underline the significance of large defence systems while recognizing the strategic importance of employing cutting-edge technology-enabled systems.
The report specifically mentioned the current Acceptance of Necessity as an example of this approach to neutralize large weapon systems that are expensive and valuable.
“We like Bharat Electronics ‘HOLD’, HAL not-rated, and Data Patterns not-rated in the defence space from a longer-term structural perspective,” stated the brokerage.
The report also highlighted that private defence equities and public sector undertakings (PSUs) are trading over +2 standard deviations going forward, primarily due to re-rating. However, with order books at an all-time high, the brokerage emphasized that working capital management and execution are crucial drivers.
Here is how defence stocks have performed in the last one year
Hindustan Aeronautics
Hindustan Aeronautics shares have demonstrated positive returns across multiple time frames. Over the past month, the stock has given a commendable 3.45% return, showcasing its stability and growth potential. The last six months have seen even more impressive results, with a substantial increase of 56.52%, indicating a strong upward trend.
Year-to-date, TVS Motor shares have surged by 5.80%, reinforcing the stock’s positive momentum in the current fiscal year. Looking at the broader picture, the stock has delivered an impressive return of over 131.15% in the last twelve months, emphasizing its sustained growth and attractiveness to investors.
Bharat Electronics
Bharat Electronics shares have displayed favorable performance across different time frames. In the preceding month, the stock generated a positive return of 1%. Demonstrating strong momentum over the last six months, it showcased returns of 46.11%, reflecting a robust performance trend.
Year-to-date figures underscore the stock’s bullish trajectory, registering significant growth at 2.11%. Zooming out to a broader perspective, the shares have consistently demonstrated strength, yielding returns of over 99% in the past year.
Data Patterns
Data Patterns shares have shown positive performance across various time frames. In the past month, the stock recorded a commendable return of 10.16%, indicating stability and growth potential. However, over the last six months, there has been a notable decrease of 13.34%, which has garnered attention.
Year-to-date figures reveal a surge of 11.31% in Data Patterns shares, highlighting the stock’s positive momentum in the current fiscal year. Taking a broader perspective, the stock has delivered an impressive return of over 52% in the last twelve months, underscoring its sustained growth and appeal to investors.