Defence stocks such as Bharat Dynamics Ltd, Hindustan Aeronautics Ltd (HAL), Paras Defence and Garden Reach Shipbuilders & Engineers Ltd fell up to 9 per cent in Monday's trade, in addition to Saturday's fall, as outlay for defence in the Budget 2025 disappointed.
HDFC Securities said the FY26 budget's allocation of just 27.66 per cent of defence spending to capital expenditure, with the majority earmarked for personnel costs, was quite disappointing. It though noted that the government has established ambitious targets to expand defence production to Rs 3 lakh crore by FY29 and boost exports to Rs 50,000 crore.
The revised estimate for FY25 declined 7 per cent against the FY25 budget estimate. The defence allocation was 13 per cent higher than the FY25 revised estimate.
"While these goals suggested an expectation of increased resource allocation, the actual 13 per cent rise in defence capital outlay to Rs 1.8 lakh crore fell short of market expectations," HDFC Securities.
GRSE shares tumbled 6.51 per cent to Rs 1,489.25. Mazagon Dock Shipbuilders Ltd tanked 5.04 per cent to Rs 2,260. Cochin Shipyard Ltd declined 4.70 per cent to Rs 1,397.10. HAL shares fell 5.92 per cent to Rs 3,552. BDL shares plunged 8.82 per cent to Rs 1,145.65. The BEL stock dropped 6.03 per cent to Rs 264.80. Paras Defence fell 6.51 per cent to Rs 987.25. Zen Technologies Ltd slipped 6.50 per cent to Rs 1,667.75. Data Patterns also declined 1.31 per cent to Rs 2,082.60.
Nuvama sees Bharat Electronics Ltd (BEL) and Data Patterns as top beneficiaries of the Budget 2025.
The government intends to revamp Shipbuilding Financial Assistance Policy. It would set up Maritime Development fund with corpus of Rs 25000 crore. It announced the extension of customs duty exemption for raw materials and consumables for shipbuilding to 2035. In the defence allocation, spending would rise on aeroengines by 4 per cent, other equipment by 35 per cent, while outlay on naval fleet has been cut by 5 per cent.
Elara Securities said the Budget was positive for Cochin Shipyard, GRSE, Mazagon Dock, Swan Defence and L&T. It was also positive for Hindustan Aeronautics, Bharat Electronics, Bharat Dynamics, Zen Technologies, Data Patterns and Astra Microwave.