Nifty India Defense Index Up 20 Per Cent In March, GRSE, Mazagon Dock, HAL, BEL Lead

The beaten-down defense stocks are now roaring back to life, with the Nifty India Defense index rising more than 20 per cent in March, effectively moving out of bear market territory. An index is typically considered out of bear territory when it rises at least 20 per cent from its most recent low. The index, which hit a recent low of 5,025.30 on March 3, has seen a sharp revival of as much as 23 per cent in less than three weeks.

A majority of these gains have come in the last three sessions, with the index climbing over 9 per cent. On March 19, the 16-constituent defense index saw a massive rally of 4.85 per cent.

Defense stocks witnessed their dream run in the financial year 2024, amid rising global tensions, surging exports and in anticipation of major announcements in the Union Budget in July, 2024. However, due to concerns over high valuations, profit-booking and disappointment in the Union Budget, the momentum in defense stocks fizzled out, with some of these stocks having corrected even more than 50 per cent.

Shipbuilding Stocks Lead Gains

Bharat Electronics Limited (BEL), which has the highest weight (21.41 per cent) in the index surged over 20.45 per cent in March. Hindustan Aeronautics Limited (HAL), the second-most (18.74 per cent) weighted stock in the index, has risen 23.75 per cent. Similarly, Solar India Industries, weighting 15.64 per cent, has surged 19.8 per cent.

However, leading the rally are shipbuilding stocks like Garden Reach Shipbuilders & Engineers (GRSE), which has rallied a staggering 42 per cent in March, and Mazagon Dock Shipbuilders, which has gained over 29.65 per cent. Following them, Cochin Shipyard too advanced 17.85 per cent.

Among other constituents of the index, Bharat Dynamics has risen over 27 per cent, Zen Technologies has zoomed 26.3 per cent, Data Patterns has moved up by 22.7 per cent, Paras Defense has a spurt of 19.8 per cent, and Astra Microwave Products has gained 13.8 per cent.

Here’s Why Defense Stocks Are Rising

Europe Mega Rs 7.5 Lakh Crore Rearmament Plan: Europe has rolled out a massive €800 billion ($872 billion or Rs 7.53 lakh crore) defense rearmament plan, dubbed as “ReArm Europe Plan/Readiness 2030.”

Last week, European Commission President Ursula von der Leyen unveiled a five-point strategy, which includes €150 billion in loans for EU member states to fund joint defense and security purchases. The plan aims to ramp up defense spending over the next four years.

India's defense stocks are riding on the Europe’s efforts to enhance their defense capabilities. This initiative gained momentum after the rise in security concerns due to Russia’s invasion of Ukraine in 2022. Recently, though, the US' suspension of its military aid to Ukraine have added further urgency.

For decades, the North Atlantic Treaty Organisation (NATO) has been the cornerstone of European security, largely relying on US resources and military presence. However, with Donald Trump's second term, this reliance is under scrutiny.

Highlighting the urgency of the situation, European Commission's President Ursula von der Leyen, on March 19, said, "The era of the peace dividend is long gone. The security architecture that we relied on can no longer be taken for granted. Europe is ready to step up. We must invest in defense, strengthen our capabilities, and take a proactive approach to security.”

Government To Soon Launch Sagarmala 2.0: Shipbuilding stocks are gaining amid reports that the Indian government will soon launch Sagarmala 2.0 with a Rs 40,000 crore budget, with a special focus on shipbuilding, repair, and recycling.

With this programme, the government aims to address infrastructure gaps, drive coastal economic growth, and position India as a global maritime leader. The programme targets Rs 12 lakh crore in investments over the next decade.

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