Defence stocks in focus today; here's why

Defence stocks are in focus on Monday morning amid a report suggesting the Defence Acquisition Council (DAC) may take up and approve defence procurement proposals worth around Rs 80,000 crore in a meeting later in the day.
A report by CNBC-TV18 suggested that the meeting, which would be chaired by Defence Minister Rajnath Singh, will see considering of emergency procurement of key weapons and military equipment, potentially expediting fresh orders for the defence sector. Business Today could not independently verify the report.

The DAC had in October approved various proposals of the services amounting to a total of about Rs 79,000 crore. For the Indian Army, Acceptance of Necessity (AoN) was accorded for the procurement of Nag Missile System (Tracked) Mk-II (NAMIS), Ground Based Mobile ELINT System (GBMES) and High Mobility Vehicles (HMVs) with Material Handling Crane. For the Indian Navy, AoN was granted for the procurement of Landing Platform Docks (LPD), 30mm Naval Surface Gun (NSG), Advanced Light Weight Torpedoes (ALWT), Electro Optical Infra-Red Search and Track System and Smart Ammunition for 76mm Super Rapid Gun Mount. For the Indian Air Force, AoN was accorded for Collaborative Long Range Target Saturation/Destruction System (CLRTS/DS) and other proposals.

Before this, DAC had approved various proposals in August, amounting to a total cost of about Rs 67,000 crore.

Batlivala & Karani Securities in a note earlier this month said India’s defence & aerospace sector is entering a structural modernisation cycle, aided by a confluence of rising geopolitical conflicts, ageing military assets and technology-driven warfare.

"Modernisation is no longer confined to sporadic procurements or one-off upgrades. It has evolved into a structural capex cycle where the focus has shifted to capability creation rather than simply platform or product acquisition," it said.

The brokerage noted that India’s defence production has already crossed $ 17.6 billion, and the government is targeting $ 36 billion by 2029. With large platforms like aircrafts, helicopters, missile systems, radars and electronics simultaneously approaching replacement or modernisation cycles, India is stepping into a procurement horizon with visibility for over a decade, the domestic brokerage said.

"This leads us to believe that the current capex cycle is sustainable in nature – much broader, stickier and technology-heavy in its vision," it said.