Defence stocks rallied on Tuesday, with the Nifty Defence index scaling a record high after the Defence Acquisition Council (DAC) approved Acceptance of Necessity (AoN)
The Nifty Defence index hit a record high of 10,012.95, up 3 per cent from the previous close of 9,754.55. The rally was led by Midhani, Data Patterns, HAL, Paras Defence, Apollo Micro Systems and MTAR Tech, which gained up to 10 per cent. The majority of counters traded in positive territory, except Dynamatic Tech.
Around 98 per cent of the procurement is expected to be sourced from Indian industry, providing an opportunity for domestic defence manufacturers.
For the Indian Army, DAC approvals include CBRN Recce Vehicles, High Mobility Vehicles, Self-Propelled Mechanical Mine Layers, Advanced Light Helicopters, Trawl Tanks and Sarvatra Bridge Systems.
For the Navy, approvals include Arudhra Radars and the design and development followed by procurement of Marine Gas Turbines. For the Indian Air Force, the approvals include systems to enhance fighter, transport and helicopter capabilities, Ground-Based Multi-Purpose Jammers and the Defence Forces Secure Access Card system.
SBI Securities identified EL, HAL, Astra Microwave, BEML, BHEL, Data Patterns, Bharat Forge and L&T among the key beneficiaries.
Brokerage views
Jefferies said India’s defence spending should see a double-digit CAGR in the medium term against the backdrop of global geopolitical tensions. It added that private sector companies have visible growth prospects north of 20 per cent, backed by government focus on domestic manufacturing and building the private sector supply chain.
Jefferies initiated a Buy on Solar Industries with a target price of ₹28,160 and Astra Microwave with a target price of ₹2,055. It initiated a Hold on Bharat Dynamics with a target price of ₹1,280.
Kotak Securities said the ₹1.1 lakh crore of AoN approvals represent one of the largest single-sitting indigenous clearances on record and identified Bharat Electronics (BEL) and HAL as key beneficiaries.
Motilal Oswal Financial Services said the DAC had approved AoNs worth ₹1.1 lakh crore, with 98 per cent earmarked for Indian industry. It said the approvals improve order inflow visibility for the defence sector and maintained BEL as its preferred pick.
DAM Capital’s project-wise assessment identified BEL as a beneficiary of CBRN Recce Vehicles and Arudhra Radars, BEML for High Mobility Vehicles and Trawl Tanks, Godrej Precision Engineering for Mechanical Mine Layers, HAL for Advanced Light Helicopters, BEML and L&T for Sarvatra Bridge Systems, Bharat Forge for Marine Gas Turbines, and BEL, Astra Microwave and Data Patterns for Ground-Based Multi-Purpose Jammers.