Defence shares rallied in early trade on Monday as the Defence Acquisition Council (DAC) approved a capital acquisition proposal worth Rs. 52,000 crore to strengthen the combat capabilities of the Indian armed forces. The rally lifted both the BSE India Defence and Nifty India Defence indices by over 1%.
Zen Technologies, Paras Defence and Space Technologies, Unimech Aerospace, Ideaforge Technology, and Dynamatic Technologies led the rally with 4% to 6%. Data Patterns, Mishra Dhatu Nigam, Bharat Electronics, Bharat Dynamics, Solar Industries, Hindustan Aeronautics, MTAR Technologies, and DCX Systems also saw their shares increase by 1-3%.
The latest rally came after the DAC, led by Defence Minister Rajnath Singh, granted Acceptance of Necessity (AoN) to multiple projects for military purchase proposals. The approvals cover the Army, Navy and Air Force and focus on air defence, anti-drone, unmanned, missile, and next-generation military technologies, the Defence Ministry said.
The Indian Army approvals cover anti-unmanned aerial vehicle (UAV) electronic warfare system ‘Akash Tarang’, Man-Portable Anti-Tank Guided Missile (MPATGM), Medium-Range Surface-to-Air Missile (SAM), Very Short Range Air Defence Systems (VSHORAD), Active Protection System (APS) for tanks, and a jet-based kamikaze drone system.
The Navy was granted approval for Multi-Influence Ground Mines, Naval Shipborne Unmanned Aerial Systems, and a Land-Based Testing Facility for electric propulsion systems by the DAC. The council passed the Air Force's Fixed-Wing-Based High-Altitude Pseudo-Satellites and other measures.
Among the likely beneficiaries of the latest approvals are Bharat Dynamics, Bharat Electronics, and Solar Industries India, according to Antique Stock Broking. The brokerage has a ‘Buy’ rating on Mazagon Dock Shipbuilders, HAL, Bharat Electronics, Bharat Dynamics, Zen Technologies, Solar Industries and PTC Industries.
The new authorizations are an indication of the change towards technology-based systems like kamikaze loitering munitions, unmanned systems, anti-drone electronic warfare, and pseudo-satellites at high altitudes, said ICICI Securities.
The brokerage said BDL would be a significant production partner for missile systems, while BEL would play a vital role in providing key electronic systems and be a prime contractor for anti-drone EW platforms.
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Choice Institutional Equities said the Rs. 52,000 crore approval reinforces a structural growth cycle for India’s defence sector, rather than a one-off trigger.
The approval of Rs. 52,000 crore is not a one-off, but a structural growth process of India's defence sector, said Choice Institutional Equities.
“The continued focus on indigenisation and technology-led procurement is anticipated to drive steady order visibility over the next 12-24 months. We remain positive, with Bharat Electronics as a consistent compounder and Bharat Dynamics as a direct play on missile-led growth, while drones and electronic warfare add further long-term upside,” said the brokerage firm.