Defence counters such as Garden Reach Shipbuilders & Engineers (GRSE) Ltd and Cochin Shipyard Ltd saw strong buying interest on Friday. So, is the defence pack coming into focus again ahead of Union Budget 2025? The answer to this question is a likely 'Yes'.
"The Focus of this upcoming Budget could be more on the defence side, which is why the entire pack is gaining momentum. I think both GRSE and Cochin stocks will do good. At least 5 to 10 per cent further upside could be expected. It will again enter into the profit booking zone once it goes above 10 per cent from current levels," Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd told Business Today.
The market expert suggested that upside potential is 'limited' in these two stocks and investors should closely monitor the Q3 (third quarter) earnings. "The defence is highly focussed but the upside is very limited. We need to watch the Q3 earnings which will start from January 15, 2025. The entire defence sector will get rerated for higher levels post Q3 results," Tapse stated.
In terms of stock-specific action, GRSE shares today surged 8.99 per cent to settle at Rs 1,693.90. At this closing value, the scrip has slipped 20.10 per cent in the last six months but has delivered 93.78 per cent returns in 2024 which is just a couple of sessions away from signing off.
The share price graph of Cochin Shipyard is also on a similar trajectory. The counter moved up 5 per cent to close at Rs 1,532.10. At this price, Cochin has corrected 31.54 per cent in six months but turned multibagger by rallying 124.80 per cent on a year-to-date (YTD) basis.
It must be noted here that bourses BSE and NSE have put the securities of GRSE under the long-term ASM (Additional Surveillance Measure) framework. Exchanges put stocks in short-term or long-term ASM frameworks to caution investors about high volatility in share prices.
On the other hand, there is no such framework pushed in force by the exchanges for Cochin Shipyard.
Separately, Antique Stock Broking said the defence story has not diminished, rather the outlook has further improved giving significant earnings visibility. The domestic broking firm remained 'bullish' on the sector. "Valuations, given earnings trajectory, are not unreasonable and the recent correction provides a meaningful opportunity to accumulate defence stocks," it said.
Meanwhile, domestic benchmarks extended their gains for the second straight session as pharma, automobile and FMCG shares picked up pace. The 30-share BSE Sensex pack rose 227 points or 0.29 per cent to finish at 78,699 and the broader NSE Nifty index moved up 63 points or 0.27 per cent to end at 23,813.