Ahead of the Union Budget 2024-25 presentation, brokerage Mehta Equities has said that defence stocks will be on the radar primarily on the backdrop of consistent demand, government backing and long-term contracts. The defence counters have surged to their historic all-time highs and most importantly present a secure investment choice, the domestic brokerage stated.
"During the interim Budget presentation in February, Finance Minister Nirmala Sitharaman allocated a staggering Rs 6.21 lakh crore for India's Ministry of Defence. This marked a substantial portion of 13.04 per cent of the Union Budget). The upward trend continues in defence capital expenditure promoting 'Aatmanirbharta'. By 2030, the Indian defence budget is likely to grow to $200 billion," it also said.
Geopolitical concerns and internal conflicts call for a renewed focus on the security and defence industry, Mehta Equities mentioned.
"War in Ukraine, an attack on Israel from Hamas, the Gaza-based terrorist group, tensions arising from China's military presence off the coast of Taiwan, border tensions," it added.
The government is trying to strengthen the nation's defence prowess by reducing dependence on imports, the brokerage underscored. Currently, India sources a staggering 60 per cent of its weapon systems from international markets.
"It's time for India to not only address its fiscal woes but also assert its security, sovereignty, and economic interests. Large and sustainable opportunities for domestic players also exist particularly in engineering services and component sourcing, on backdrop of goal of reaching Rs 50,000 crore in exports by 2029-2030. India shall be leading global defence manufacturing hub sooner than later," Mehta Equities said.
On the stock-specific front, the brokerage has picked Hindustan Aeronautics Ltd (HAL), Bharat Dynamics Ltd (BDL), Zen Technologies Ltd and Data Patterns (India) Ltd stocks from the defence space.
Separately, JM Financial said the government is likely to announce a higher allocation for defence capital expenditure. BEL and HAL shares will be positively affected, it underscored.