The Nifty Defence Index surged more than 2% on February 1, reflecting strong investor optimism ahead of the Union Budget 2024. The rally was driven by expectations of increased government spending on defence modernization, domestic manufacturing, and research & development (R&D) under the Aatmanirbhar Bharat initiative.
Defence Stocks Rally on Budget Anticipation
As Finance Minister Nirmala Sitharaman prepared to present the budget, the Nifty Defence Index climbed 2.29%, reaching an intraday high of 6,541. Several defence stocks witnessed robust gains, with Ideaforge, Zen Technologies, and DCX Systems rallying up to 11% during the session.
Leading defence manufacturers such as Hindustan Aeronautics Limited (HAL) and Mazagon Dock Shipbuilders also saw notable increases of 3% and 2%, respectively. Bharat Electronics Limited (BEL) hit an intraday high of ₹299.60 per share, up 2.2%.
Other major players in the sector, including Bharat Dynamics Limited (BDL), Data Patterns, and Paras Defence, surged up to 5%, reflecting investor confidence in strong capital outlays for the sector.
Government’s Focus on Defence Spending
Over the past decade, India’s defence expenditure has witnessed a compound annual growth rate (CAGR) of 8.1% in nominal terms, rising from ₹2.85 lakh crore in 2014-15 to ₹6.22 lakh crore in 2024-25. Despite this growth, its share relative to GDP has declined from 2.4% in 2020-21 to 1.9% in 2024-25.
The government has consistently promoted self-reliance in defence manufacturing, reducing dependency on imports. Policies like the Defence Production & Export Promotion Policy (DPEPP) and increased allocations for capital expenditure have fueled investor interest in the sector.
Why Are Defence Stocks Gaining?
- Increased Budget Expectations – Analysts anticipate a higher allocation for defence R&D, procurement, and infrastructure.
- Focus on Aatmanirbhar Bharat – The push for indigenous manufacturing could lead to new defence contracts, boosting revenues of local firms.
- Rising Global Demand – Indian defence firms are securing export orders, strengthening their financial outlook.
- Strategic Policy Support – Possible tax incentives, policy reforms, and incentives for private-sector participation could further drive growth.
Key Financial Ratios of Defence Stocks
Here’s a look at the financial strength of some of the top defence companies in India:
| Company | CMP (₹) | Market Cap (₹ Cr) | P/E Ratio | ROE (%) | Debt/Equity |
|---|---|---|---|---|---|
| HAL | 2,750 | 91,000 | 18.5 | 26.4% | 0.03 |
| BEL | 299.60 | 72,000 | 32.8 | 20.1% | 0.02 |
| Mazagon Dock | 2,075 | 42,500 | 24.3 | 24.6% | 0.01 |
| BDL | 1,225 | 22,000 | 28.7 | 18.9% | 0.04 |
| Data Patterns | 2,050 | 11,500 | 47.2 | 22.5% | 0.05 |
What’s Next for Defence Stocks?
The Union Budget will play a crucial role in setting the direction for India’s defence sector. If the government announces a higher capital outlay, increases FDI limits, or provides tax benefits to manufacturers, the momentum in defence stocks could continue.
With strong policy support and growing global demand, India’s defence industry is poised for long-term growth, making it an attractive sector for investors.
Stay tuned for more updates on the Union Budget 2024 and its impact on the stock market.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.