defence stocks: Rising India-Pak tension fires up defence stocks

Paras Defence soared 20% on Tuesday, while Data Patterns (India) and Garden Reach Shipbuilders and Engineers surged 14.9% and 12.3% respectively. Cochin Shipyard and Mazagon Dock Shipbuilders jumped 10% and 8.7% each. Unimech Aerospace and Manufacturing and DCX Systems India gained over 6%. Hindustan Aeronautics rose 4.15% and Bharat Electronics moved 4% higher.

Analysts said these stocks could gain about 10-15% further from these levels also on expectations of strong fourth quarter results.

Agencies

“Tensions between India and Pakistan are pushing the defence stocks higher as investors are sentimentally positive on these stocks,” said Manish Chowdhury, head of research, StoxBox.

“Given the good numbers reported by Mazagon Dock Shipbuilders, other companies are also expected to post strong results this quarter.” The fresh conflict is perceived to boost government spending for defence, resulting in higher orders.

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Out of 18 stocks on Nifty India Defence Index, 17 advanced and 1 declined on Tuesday. The Nifty India Defence Index gained for the second straight session on Tuesday, advancing 5% on Tuesday after moving 4% higher on Monday. The benchmark Nifty has risen 1.2% in the previous two trading sessions. Siddartha Khemka, head of retail research, Motilal Oswal Financial Services, said the Rafale deal between India and France for 26 aircrafts worth `63,000 crore and reports on allocation of Rs 25,000 crore for the maritime development fund announced in the Budget have contributed to the recent jump in defence stocks. “Further upside potential of around 10-15% exists in these stocks in the near term as defense spending is likely to go up and the results are anticipated to be strong this quarter,” said Khemka. “Investors with a 2-3-year investment horizon can also buy in the space.”