BEL, HAL, BDL, GRSE, MTAR Tech, Paras Defence shares fall up to 6%; here's why

Shares of defence manufacturers such as Bharat Electronics Ltd (BEL), Bharat Dynamics Ltd (BDL), MTAR Tech, Paras Defence and Space Technologies Ltd and Hindustan Aeronautics Ltd, among others, fell up to 6 per cent in Monday's trade amid a broader market selloff, as investors paid heed to a surge in crude oil prices globally, which may hurt the domestic economy and could potentially delay defence orders. 

MTAR Technologies Ltd tanked 6.44 per cent to Rs 3,541.50. Paras Defence and Space Technologies Ltd plunged 5.24 per cent to hit a low of Rs 708.60. BEL declined 3.9 per cent to Rs 450.05. BDL slipped 4.32 per cent to Rs 1,298.05. HAL fell 1.85 per cent to Rs 3,949.50. Mazagon Dock Shipbuilders Ltd, Cochin Shipyard and Garden Reach Shipbuilders & Engineers Ltd (GRSE) slipped up to 4 per cent.  

Analysts, however, stayed positive on the long-term outlook for the sector, as they believe the defence sector globally has entered a structurally elevated growth phase, driven by persistent geopolitical conflicts, rapid technological modernisation of weapons, and a multi-domain warfare.

"We believe that the expected sector growth trajectory offers a multi-year compounding story, combining sustained order inflows and efficient execution. We maintain a positive outlook on the sector and initiate coverage on eight companies. We prefer electronics value chain players and companies with proven technological capabilities to transition to a full solutions provider level from a subsystem manufacturer, said HDFC Institutional Equities.

The brokerage said rising capital expenditure by the Ministry of Defence (MoD), coupled with tighter import embargo are expected to serve as the structural growth drivers for the Indian defence industry. 

Increased investments in indigenized R&D, technology modernisation, along with long term cross-border collaborations will be additional growth catalysts, it said.

"These strategic initiatives are expected to drive up sector evolution visibility, strengthen indigenization, and reinforce the long-term growth runway for Indian defence OEMs and subsystem suppliers," the brokearge added.