Indian stock market: BEL to HAL — Why defence stocks will be in focus on Monday?

According to stock market experts, defence companies with strong CAPEX are expected to come under the radar of Dalal Street bulls as some value buying is expected for to defence segment when the Indian stock market reopens on Monday.

Speaking on the impact of the DAC meeting outcome on the Indian stock market, Amit Goel, Co-Founder and Chief Global Strategist at Pace 360 said, “The recent military order of 80,000 crores signifies a significant YoY increase in military spending. This amount, constituting 13% of the military sector’s budget for FY 24–25, aligns with the government’s Long-Term Integrated Perspective Plan and Atmanirbharta campaign.

Companies to benefit from this DAC meeting outcome

On defence companies that may benefit from this DAC meeting outcome, Rajesh Sinha, Senior Research Analyst at Bonanza Portfolio said, “Defence PSUs like Bharat Electronics Ltd. (BEL), Hindustan Aeronautics Ltd. (HAL), Bharat Dynamics Ltd. (BDL), etc. are expected to be the biggest beneficiaries of the project approval of ₹84,560 crore.”

Sinha went on to add that in December 2023, DAC gave initial approval to defence acquisition projects worth Rs.2.23 lakh crore that included the procurement of 97 Tejas light combat aircraft and 156 Prachand combat helicopters, in a major move to significantly enhance the combat capabilities of the armed forces.

On defence shares to buy on Monday, Pace 360 expert said, “Defence-related stocks, especially HAL and BEL, stand to benefit from this, with both companies having robust order books and efficient delivery capabilities. Additionally, both companies also have their capital expenditures in place, further benefiting the stocks. BEL, with its strategic diversification plans into sectors like metro, railway, and artificial intelligence, presents a compelling investment opportunity compared to the relatively overvalued HAL. Additionally, BEL’s involvement in supplying equipment for key ship-building programs such as the Next Generation Offshore Patrol Vessel, Next Generation Missile Vessels, and cadet training ships, adds to its growth potential.”

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HAL share price outlook

Speaking on HAL share price, Manish Chowdhury, Head of Research at StoxBox said, “HAL share looks a favorable and long-term play on the growing capex and modernization of India’s air defense system. The industry tailwinds such as the government’s focus to indigenously procure its defense requirements along with the company’s inherent strengths such as a strong order book and improvement in profitability due to economies of scale and operating leverage make it a compelling story from a long-term perspective.”

BEL share price outlook

On the outlook for BEL shares, the StoxBox expert added, “As far as BEL is concerned, we believe that the company would play a critical role in Make in India and AtmaNirbhar Bharat initiatives and would benefit from its strong execution, robust manufacturing and R&D base, strong balance sheet and healthy return ratios.”

Disclaimer: The views and recommendations above are those of individual analysts, experts, and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 17 Feb 2024, 11:21 AM IST