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Mazagon Dock Surges 8%: HAL, BEL and GRSE Join the Defence Stock Rally— Here's Why

Defence stocks witnessed a sharp uptrend on Wednesday even as broader markets remained in the red territory. Mazagon Dock, which was earlier down by more than 20 per cent, saw a massive jump of 8 per cent

Defence Stocks rallied on Wednesday even as broader markets slumped on the back of selling pressure witnessed by global markets. Mazagon Dock was up by nearly 8 per cent on the National Stock Exchange. Garden Reach Shipbuilders surged by almost 3 per cent. Other defence stocks like Hindustan Aeronautics (HAL) and Bharat Electronics (BEL) followed a similar trail.

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The larger optimism primarily came after the Defence Acquisition Council (DAC) approved 10 capital acquisition proposals worth Rs 1,44,716 crore.

"The Defence Acquisition Council (DAC), under the chairmanship of Raksha Mantri Shri Rajnath Singh on September 03, 2024, accorded Acceptance of Necessity (AoN) for 10 capital acquisition proposals amounting to Rs 1,44,716 crore," the government release read.

Interestingly, the rally comes after several defence stocks witnessed a sharp plunge in their share prices during mid-August. Most of the multibagger defence and shipbuilding stocks were struggling and plummeted by over 20 per cent on the bourses last month.

What are some major announcements in the Defence Space this week?

Besides DAC giving its green light to 10 key acquisition proposals, which include advanced Future Ready Combat Vehicles (FRCV), Air Defence Fire Control Radars and Do-228 aircraft, the Cabinet Committee on Security (CCS) approved the purchase of 240 AL-31FP aero engines for the Su-30MKI fighter jets. These engines cost around Rs 260 billion and will be manufactured at HAL’s Koraput facility.

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"Cabinet Committee on Security approved the proposal for procurement of 240 aero-engines (AL-31FP) for Su-30 MKI aircraft of the Indian Air Force (IAF) under Buy (Indian) category from Hindustan Aeronautics Limited (HAL) at a cost of over Rs 26,000 crore inclusive of all taxes and duties," the release stated.

The two recent back-to-back developments might diminish concerns that the D-street might have regarding the lack of orders for defence sector. Additionally, the high level of indigenisation content implies attractive opportunities for players in the domestic defence ecosystem, as per a report by ICICI Securities.

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