Defence stocks were in focus on Monday, March 30, following Defence Minister Rajnath Singh’s approval of agreements totaling approximately ₹2.38 lakh crore the previous week. Shares of Garden Reach Shipbuilders & Engineers climbed by 4%, while Astra Microwave Products increased by 3.5%.
Cochin Shipyard witnessed a rise of 2.2%, Paras Defence and Space Technologies saw a gain of 2.5%, and Bharat Dynamics rose by 1.3%. At the same time, Hindustan Aeronautics (HAL) also saw an uptick, rising by 1%.
Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One, said that defence and shipping stocks witnessed a strong start following positive developments over the weekend in the defence space; however, most stocks have pared their morning gains and are now trading below Friday’s low.
“Overall, the sector continues to trade below key moving averages, and until there are clear signs of reversal or a decisive close above the 20 DEMA, the space is likely to remain under pressure. That said, relative strength may persist compared to the broader markets, and stocks like Bharat Electronics (BEL) and HAL could outperform once broader market strength resumes,” added Bhosale.
According to reports, Singh approved the Acceptance of Necessity for the proposals during a meeting of the Defence Acquisition Council (DAC),the primary authority for defence procurement in India.
With this latest approval, the total clearances in the current fiscal year have reached an all-time high of ₹6.73 lakh crore (not including the Rafale acceptance of necessity amounting to ₹3.25 lakh crore). This figure is more than three times greater than last year’s total of ₹2.2 lakh crore.
Key stocks to benefit
According to Motilal Oswal Financial Services, brokerage firm, defence firms currently boast robust order books and stand to gain further from export opportunities. In the short term, challenges may arise due to the acquisition of imported components, although the ongoing emphasis on indigenization is steadily decreasing reliance on imports. The brokerage maintains an optimistic outlook on the defense sector, with Bharat Electronics being their preferred choice within their coverage universe.
Motilal Oswal Financial Services has maintained a positive stance on select defence and capital goods stocks, reiterating its recommendations based on forward earnings visibility. The brokerage continues to recommend a “Buy” on Bharat Heavy Electricals Ltd (BHEL), which is trading at 41.5x/35.4x FY27E/FY28E EPS, with an unchanged target price of ₹520 based on 45x two-year forward earnings.
Further, the brokerage has also retained a “Buy” on Hindustan Aeronautics Ltd (HAL), valuing it at ₹5,500 using a blend of DCF and 30x forward earnings, despite awaiting further clarity on Tejas deliveries. Similarly, Bharat Dynamics Ltd (BDL) remains a “Buy” with a target of ₹1,800, while Astra Microwave Products Ltd (AMPL) is also rated “Buy” with a target of ₹1,150.
Meanwhile, Zen Technologies Ltd (ZEN) has been assigned a “Neutral” rating with a target price of ₹1,400, pending greater clarity on order inflows and subsidiary performance sustainability.
B&K Research has maintained a constructive outlook on select defence stocks, reiterating its recommendations based on earnings visibility and valuations. The brokerage has retained a “Buy” rating on HAL with an unchanged target price of ₹5,467, valuing it at 34x December 2027E EPS, while the stock currently trades at 25x/21x FY27/FY28E EPS.
It has also reiterated a “Buy” on Bharat Electronics Ltd with a target price of ₹513, based on 45x December 2027E EPS, with the stock trading at 41x/34x FY27/FY28E EPS. Meanwhile, Bharat Dynamics Ltd has been assigned a “Hold” rating with an unchanged target of ₹1,278, based on 42x December 2027E EPS, as the stock currently trades at relatively higher multiples of 45x/35x FY27/FY28E EPS.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
