Cochin, Mazagon, MTAR, BDL, HAL up 10–20%, retail investors cheer Sept defence rally

At least 10 defence stocks delivered double digit returns in the first half of September, with MTAR Technologies Ltd, BEML Ltd and Data Patterns (India) Ltd leading returns chart with up to 20 per cent returns. Retail investors, owning up to Rs 2 lakh worth shares, held 7-33 per cent stake in the 10 defence companies as of June quarter, data compiled from corporate database Ace Equities showed. 

MTAR Technologies Ltd delivered 20 per cent return, rising to Rs 1,670.90 apiece from Rs 1,396.10 level within the 15-day period. Retail investors owned 33.22 per cent stake in this defence company. 

BEML, where retail ownership stood at 17.16 per cent, is up 13.88 per cent in September so far. Data Patterns (India) Ltd gained 13 per cent while Mishra Dhatu Nigam Ltd (MIDHANI) is up 12.5 per cent during the same period. Retail ownership in MIDHANI stood at 12.72 per cent in the June quarter.

"We recommend maintaining a positive yet cautious stance, with an emphasis on stock selection aligned to rotational sectoral trends and themes such as defense and railways for long positions," said Ajit Mishra – SVP, Research at Religare Broking. 

Cochin Shipyard Ltd, Mazagon Dock Shipbuilders Ltd, Bharat Forge Ltd, Bharat Dynamics Ltd (BDL), Paras Defence And Space Technologies Ltd and Hindustan Aeronautics Ltd (HAL) are six other defence stocks rising 10-12 per cent in September so far. 

Astra Microwave Products Ltd, Bharat Electronics Ltd (BEL), DCX Systems Ltd, Garden Reach Shipbuilders & Engineers Ltd (GRSE), Solar Industries India Ltd, Unimech Aerospace and Manufacturing Ltd and Zen Technologies Ltd are up 2-9 per cent in September so far. 

Some brokerages are cautious. 

Kotak called many defence stocks such as Cochin Shipyard, Bharat Dynamics, Hindustan Aeronautics (HAL) and Mazagon Dock as narrative stocks. It noted that many narrative stocks now have high passive holdings. 

"Many of the ‘narrative’ stocks are now significantly owned by passive funds, which would suggest that sectoral or thematic passive funds that got launched later bought the stocks from the market to simply comply with the higher weight of such stocks in the benchmarks and not on the basis of the fundamentals of the companies. In other words, active funds divested the shares to passive funds," it said.