Defence stocks zoom on strong order books

The submarines will be constructed at the company’s facility in collaboration with the Naval Group of France, said media reports.

Shares of defence sector companies surged 10-20% on Tuesday, prompted by strong order books and healthy pipelines.

According to reports, the Defence Procurement Board has approved a proposal to buy 26 Rafale fighters and Scorpene submarines for the Indian Navy, ahead of the prime minister’s visit to Paris this week.

Mazagon Dock Shipbuilders rose nearly 10% and hit an all-time high of Rs 1,591 on the NSE. The submarines will be constructed at the company’s facility in collaboration with the Naval Group of France, said media reports.

The stock has rallied nearly 101% year-to-date and nearly 505% in a year.

Zen Technologies rose nearly 15% after the company announced it has bagged a significant order in the export markets valued at around Rs 340 crore.

The share price has rallied 158% YTD and 178% in the past year.

Last week, the company won an order worth Rs 160 crore from the government.

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According to brokerage firm PhillipCapital, the Indian defence sector has experienced significant reforms, leading to improved efficiency, self-reliance, and capability.

Other defence stocks such as Cochin Shipyard and Bharat Dynamics rallied 11% and 14%, respectively.

Mishra Dhatu Nigam, Bharat Electronics, and Hindustan Aeronautics were up in the range of 3 to 6%. Shares of Premier Explosives locked an upper circuit of 20% after the company won orders worth over Rs 550 crore from the government.

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According to Gaurang Shah, senior VP, of Geojit Financial Services, the defence sector is a key beneficiary of the Make in India and Atmanirbhar Bharat policies.

Several policy initiatives and procedural reforms have been undertaken by the government to encourage domestic design, development, and production of defense equipment.

“This sector has undergone significant reform. Under the Atmanirbhar Bharat scheme, the government is trying to reduce imports of weapons and develop missiles and other artillery in India. The rally in share prices is due to an increase in the order books of these companies. These orders are not just from India, but also from abroad. It might seem that the sector has already moved up, but valuations still seem attractive enough to put money in it”, said Kshitiz Mahajan, CEO, of Complete Circle.

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