Defence stocks traded lower on Thursday’s trading session, even as Indian equity markets saw a rebound on the backdrop of the government’s decision to streamline Goods and Services Tax (GST) rates, which lifted investor confidence. The 56th GST council on Wednesday made a decision to simplify GST rates to two levels: 5% and 18%, by combining the 12% and 28% rates.
Ruchit Jain, VP – Equity Technical Research, Motilal Oswal Financial Services Ltd highlighted that the defence stocks have corrected in last one month and have not shown any signs of reversal yet. The stocks also have not participated in the recent broader market pullback and hence, it is advised to keep a wait and watch approach for momentum traders.
Looking at the fundamentals, Krishna Doshi, defence analyst at Ashika Institution Research, remains positive on the sector. Doshi explained that this move is in line with the aspirations to increase India’s self-reliance and create Aatmanirbhar Bharat. It will facilitate lower procurement costs for the armed forces and reduce the working capital burden on defence PSUs and private suppliers.
“The GST rationalisation is a clear structural positive for the Indian defence ecosystem, benefiting both large platform manufacturers (HAL, BEL, MDL, GRSE, BDL) and specialised sub-system/component suppliers in the private sector. It strengthens the policy push towards self-reliance, affordability, and faster modernisation of India’s armed forces,” said Doshi.
