Major defence stocks stage a comeback; Cochin Shipyard surges by 10% | News on Markets
Defence stocks witnessed a turnaround on Friday after a steep fall in the past two months. Cochin Shipyard surged 10 per cent, while Garden Reach Shipbuilders, Mazagon Dock Shipbuilders, and Paras Defence & Space Technologies gained 5 per cent or more.
According to experts, interest in defence stocks likely went up as the correction eased valuations to an extent. The buoyant sentiment in the equity market also boosted buying in the sector.
“It is a reaction to the Fed rate cuts and investors speculating on potential promising opportunities. Some investors might have thought that the fall was overdone and they started buying into the theme again,” said Vikas Gupta, smallcase manager and chief executive officer at OmniScience Capital.
The rally in Cochin Shipyard was also driven by its inclusion in the FTSE All World Index. The inclusion is expected to bring $30 million inflows into the defence major.
Despite the rally on Friday, most defence stocks are down up to 27 per cent in the three-year period. Bharat Dynamics, Paras Defence & Space Technologies, and Hindustan Aeronautics have fallen the most during the period.
Most brokerages had a sell rating on these stocks, largely due to overvaluation. The price-to-earnings ratios had swelled after stock prices went up multifold. The rally was initially fuelled by the government’s focus on defence manufacturing in India and the resultant increase in order books.
In the one-year period, many of the defence stocks are up over 100 per cent. Cochin Shipyard is the biggest gainer, having gone up 246 per cent.
First Published: Sep 20 2024 | 7:37 PM IST
