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Informist, Friday, Sep 6, 2024

MUMBAI - Shares of select defence-related companies may rise next week as order inflow has likely begun again. However, high valuation may limit any upside as several of these orders are factored into stock prices.

On Tuesday, the Defence Acquisition Council, under the Ministry of Defence, approved 10 capital acquisition proposals worth 1.45 trln rupees. The proposals included procurement of future-ready combat vehicles, air defence fire control radars, Dornier-228 aircraft, and next-generation fast patrol vessels, an official release said. On Monday, the Cabinet Committee on Security approved the procurement of 240 aero-engines for Su-30 MKI aircraft from Hindustan Aeronautics for 260 bln rupees.

ICICI Securities said these two announcements should allay concerns of the market regarding lack of orders in the defence sector. It said the Cabinet Committee on Security's approval for aero engines gives a positive signal for other possible orders. "We await further developments pertaining to progress on Pinaka and MRSAM (medium range surface-to-air missile) orders, that are pending for some time now," the brokerage said.

Shares of defence companies have fallen due to expensive valuations and amid a dearth of order announcements, which slowed down due to the General Election-related disruptions. The Nifty India Defence Index has fallen over 17% in the past two months. 

Overall, analysts are positive on capital goods companies amid strong demand for their products. This strong demand is expected to help companies in the sector keep their margins high in the second half of this financial year (Oct-Mar) as well.

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Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Anshul Choudhary
Edited by Tanima Banerjee

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