Defence stocks have seen a strong run up in trade today. Mazagon Dock rallied 10% intra-day. Several others like Garden Reach Shipyard hit 20% upper circuit in trade today. The other top gainers include Cochin Shipyard up 8.8%, HAL up 4.4%, Bharat Dynamics up 6%. Even BEL, a key Nifty stock, gained nearly 2%. One of the major reasons why defence stocks clocked gains is the key reforms passed by the German Parliament enabling a significantly higher defence spend.
Defence stocks: The German push
The German Parliament on Tuesday voted for a key fiscal package that would enable changes to the country’s long-standing debt policies and facilitate higher defence spending along with 500 billion euro fund for infrastructure and climate change.
However, this law also needs the approval of Bundesrat. This is the German body representing the country’s states. This package will be presented to Bundesrat on Friday. Under this proposed law, the defence expenditure won’t be limited by the debt brake. Loans for infrastructure fund would also now be exempt of the debt brake.
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That apart several key domestic factors also helped the rally. India’s defence budget’s capital outlay has increased to Rs 1.8 trillion (up 12.9% from FY25 revised estimates for the Budget) and the Indian Army has achieved 88% self-sufficiency in ammunition production. The Indian Navy has finalised Rs 36,000 crore deal with Mazagon Dock Shipbuilders and the contract is likely to be signed by FY25-end. This has also given a flip to overall sentiment.
That apart the Ministry of Defence has signed Rs 10,200 crore PINAKA contract with Solar Industries and Munition India . This could help counters like Azad Engineering and PTC Industries.
Kalyani Strategic Systems exporting 100 artillery guns, Dynamatic Technologies opening a new Airbus A220 sub-assembly line in India and BEL inaugurated 2nd assembly line for electronic fuses for artillery ammunition are other key developments in the sector.
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