A sharp correction is being seen in the stocks of defense companies. However, these companies have given excellent returns in the last 3 years. The shares of Nifty Defense Index have fallen by 55% till now from the peak of July 2024. The Nifty index of the National Stock Exchange (NSE) has fallen by almost 29% from its all-time high. In such a situation, the question being raised is whether the decline in these shares will continue further or whether the time has come to buy the shares.
Due to the focus on ‘Atmanirbhar Bharat’ campaign in the defense sector, there has been a rise in the shares of this sector in recent times and many defense stocks have given multibagger returns. Due to import ban, the stock of many companies rose by 400%. However, market valuations have seen a sharp decline due to recent profit booking.
The biggest decline has been seen in the shares of Mazagon Dock Shipbuilders. This share is 45% below its peak level of Rs 5,860 on July 5, 2024. The company had implemented a 1:2 stock split in December 2024, where one existing share with a face value of Rs 10 was divided into 2 shares with a face value of Rs 5. Cochin Shipyard, another major company in the defense sector, is trading at about 52 percent below its record level of Rs 2,979.45 on July 8.
The condition of some other sectors of the defense sector is as follows:
Garden Reach Shipbuilders and Engineers Limited: Was at Rs 2,833.80 on July 5, 2024 and is now trading about 51.80% below it.
Data Pattern (India) Limited: There is a decline of about 43.78% in the company’s shares from Rs 3,655 (5 July 2024).
Bharat Dynamics: There is a decline of 38%.
DCX Systems Ltd: There is a decline of 24.73%.
Bharat Electronics: The shares of this company are 23.28 percent below the peak level.
Hindustan Aeronautics: The share of this company is 33.38 percent below its peak of Rs 5,674.75.
What do experts say
Despite the downward trend, Antique Research analysts see a buying opportunity in the recent correction. According to experts, the government’s continuous focus on domestic defense production, increase in export orders etc. are providing opportunities for long-term growth for this sector.
the way forward
Experts believe that the structure of the Indian defense sector is strong in view of the emphasis on indigenization and the increasing demand for weapons in India. Manish Choudhary, Head of Research at Stocksbox, says that after the recent correction in defense sector stocks, investors can collect these stocks from a medium to long term perspective.