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"Brokerages Exercise Caution Yet Express Optimism in Defence Sector; Assign 'BUY' Ratings on 4 stocks"

The brokerage's positive outlook is balanced with a cautious evaluation of existing valuations that already encompass optimistic projections for substantial growth. This anticipated growth is expected to be fueled by a robust order pipeline, underpinned by government initiatives like Atmanirbhar Bharat, the Positive Indigenisation List, and the Defence Modernisation Plan, as indicated by InCred and Antique.

"Brokerages Exercise Caution Yet Express Optimism in Defence Sector; Assign 'BUY' Ratings on 4 stocks"

In 2023, companies within the defense sector experienced robust growth, propelled by advantageous government policies such as "Make in India" and the "Atmanirbhar Bharat" initiative. As the defence sector continues to receive significant orders, the outlook remains firm, promising continued growth and stability for these key players. The positive momentum in share prices and the consistent influx of orders highlight the success of the defense industry in aligning with the national agenda of self-reliance and bolstering India's capabilities in defense production.

Fundamental reasons why Brokerage Firms expects more gains :

1. DAC Approvals for CY23:

- The Defence Acquisition Council (DAC) has granted Acceptance of Necessity (AoN) for projects totaling ₹3.5 trillion in the calendar year 2023.

- This represents a substantial 35% Year-on-Year growth compared to the ₹2.6 trillion approved in the previous fiscal year (FY23).

2. Record-High Defence Production in FY24:

- Defence production in India exceeded ₹1 trillion in FY23, and the government aims to elevate it to ₹1.5 trillion in FY24.

- Key policy measures include reserving 75% of the defence capital procurement budget for domestic industries, up from 68% in FY23.

- The issuance of five positive indigenization lists, leading to a ban on imports for the listed products.

- Integration of Micro, Small, and Medium Enterprises (MSMEs) and start-ups into the defence supply chain.

3. Anticipated 26% Growth in Defence Exports in FY24:

- Defence exports, a focal point for the government, surged to ₹160 billion in FY23, witnessing a tenfold increase since FY17.

- Projections indicate a 26% Year-on-Year growth, with exports expected to reach ₹200 billion in FY24.

4. Development of Defence Ecosystem through Corridors:

- Two Defence Industrial Corridors (DIC) have been established in Uttar Pradesh and Tamil Nadu, aiming to bolster the country's defence manufacturing ecosystem.

- The goal is to attract investments of ₹100 crore in each Defence Industrial Corridor, fostering a robust environment for defence-related industries and innovation.

Best Defense Stocks to BUY for long term

  • Hindustan Aeronautics

  • Bharat Electronics

  • Bharat Dynamics

  • Data Patterns

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.

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