Defence stocks such as Bharat Electronics Ltd (BEL), Hindustan Aeronautics Ltd (HAL), Bharat Dynamics Ltd (BDL), Cochin Shipyard Ltd and Data Patterns India Ltd, are in focus on Monday morning as the Union Budget 2024, which is scheduled for Tuesday, July 23, is expected to see higher allocation for the sector.
To recall, the Finance Minister Nirmala Sitharaman announced a budgetary allocation of Rs 1.72 lakh crore towards FY25 defence capital expenditure in her interim Budget 2024, which was 20.33 per cent higher than the actual expenditure of FY23 and 9.40 per cent more than the revised allocation of FY24.
The upward trend continues in defence capital expenditure as the government is promoting ‘Aatmanirbharta’, with the defence budget likely to grow to $200 billion by 2030, said Mehta Securities.
This brokerage has Hindustan Aeronautics (HAL), Bharat Dynamics (BDL), ZEN Technologies Ltd and Data Patterns Ltd as it preferred picks going into the Budget 2024.
Despite boasting the world’s fifth-largest defence budget, India sources a 60 per cent of its weapon systems from international markets, it said.
"Indian government is trying to strengthen the nation’s defence prowess by reducing dependence on imports. Large and sustainable opportunities for domestic players also exists particularly in engineering services and component sourcing, on backdrop of goal of reaching 50,000 crore in exports by 2029-2030)," it said.
Prabhudas Lilladher expects higher allocations towards aircraft, engines, and vehicles. Ministry of Defence will also continue its thrust on exports, having announced a Rs 50,000 crore defence export target by FY29, it said.
This brokerage said India's defence story remains intact due to unrelenting focus on enhancing domestic production capabilities, improving technology of arms and armaments and push for exports.
It sees increased order inflow in segments like fighter aircraft, helicopters, armoured vehicles, missiles and naval platforms. Each platform will require new electronics such as advanced avionics, radars, fire control systems, as well as various ancillary equipment, it said.
This brokerage said a sustained focus would keep defence stocks such as HAL, BEML, BEL, Mazagon Dock Shipbuilders, Bharat Dynamics, GRSE, Data Patterns and Cochin Shipyard buzzing.
Ahead of the Budget 2024, MOFSL initiated coverage on Zen Technologies, calling it a niche player in the defense simulator-based training market.
"The company has also forayed into the counter-drone market. The addressable markets for simulators and counter-drones in India are estimated at Rs 14,000 crore and Rs 12,000 crore, respectively, over the next five years. The company commands a significant market share in both of these segments, with just 2-3 players in the defense simulator market and 5-6 players in the counter-drone market," it said.
Fisdom Research said stocks such as BEL, HAL and DDL to be on investor radar.