Defence Stocks: MTAR Tech, Zen Tech, HAL Extend Gains For 7th Consecutive Day – What Fuelled Rally?

Shares of defence companies like MTAR Technologies, Zen Technologies, Hindustan Aeronautics (HAL), and Bharat Dynamics among others rallied up to 10 per cent on Monday, March 24. Accordingly, the Nifty India Defence index, which tracks 16 stocks that broadly represent the defence theme, surged 3.4 per cent to hit a two-month high.

This is the seventh straight session of gains for the index, during which it rallied nearly 16 per cent.

Among the Nifty India Defence index constituents, Zen Technologies led the rally with 7.16 per cent gains, followed closely by MTAR Technologies, with a gain of 7.14 per cent, and HAL, which rose by 6.47 per cent.

Bharat Dynamics and Mishra Dhatu Nigam also saw strong gains of 5.17 per cent and 4.07 per cent, respectively. Other stocks in the index, including Cochin Shipyard, Dynamatic Technologies, Mazagon Dock Shipbuilders, Paras Defence, Bharat Electronics (BEL), and Solar Industries India, rose between 2 per cent and 3.5 per cent. All 16 constituents ended the day in the green.

Defence Stocks Roaring Back To Life

The beaten-down defence stocks, once D-Street’s darling in 2024, have been re-gaining momentum lately owing to both domestic and global factors. The previous rally last year had come on the heels of increased global tensions, rising exports, and expectations of major announcements in the Union Budget in July 2024.

However, concerns over high valuations, profit-booking, and disappointment in the Union Budget caused the momentum to fade. Some defence stocks crashed even more than 50 per cent in the recent correction.

Why Are Defence Stocks Rallying Again?

The recent rally in defence stocks was triggered by the Defence Acquisition Council (DAC) approving proposals worth Rs 54,000 crore to boost the operational capabilities of the Indian Navy and Air Force.

Brokerage firm Antique, said, “With project approvals worth Rs 2.2 lakh crore in YTD FY25, we believe defence PSUs have strong growth opportunities in the near to long term.”

The initial rally, however, came when Europe launched its €800 billion ($872 billion or Rs 7.53 lakh crore) defense rearmament plan, known as the "ReArm Europe Plan/Readiness 2030." As part of the plan, European Union (EU) member states will aim to increase defense spending over the next four years.