Defence stocks: What MFs bought and sold at peak of US-Iran war

Defence was seen as a top trade in March at the peak of the US-Iran war. While stocks such as Hindustan Aeronautics Ltd (HAL), Zen Technologies, Data Patterns (India) Ltd and Bharat Dynamics Ltd (BDL) did see some mutual fund (MF) inflows for the month, Bharat Electronics Ltd (BEL) witnessed heavy MF selling. Defence shipbuilding names such as Cochin Shipyard Ltd, Mazagon Dock Shipbuilders Ltd and Garden Reach Shipbuilders and Engineers (GRSE) failed to attract MF interest, data available with PRIME Database suggests.  

March saw Nifty falling 11.3 per cent, but equity-oriented mutual funds recorded strong net inflows of Rs 40,500 crore. 

Among the stocks that attracted MF buying was HAL, where mutual funds raised their stake to 5.84 per cent in March from 5.73 per cent in February, purchasing a net Rs 272 crore worth of shares.

Zen Technologies saw Rs 155 crore worth buying, as MFs upped stakes to 6.77 per cent from a 5.83 per cent in February. MFs bought a net Rs 101 crore in Data Patterns. Bharat Dynamics attracted Rs 64 crore worth MF buying. MF held 9.21 per cent stake in Bharat Dynamics Ltd at March end.     
BEL saw a strong Rs 515 crore net MF selling, as institutional class trimmed stake to 14.28 per cent in March from 14.44 per cent in February. Cochin Shipyard saw Rs 67 crore selling, as MF stake in the shipping defence PSU declined to 2.06 per cent from 2.25 per cent YoY. MTAR Tech saw Rs 45 crore MF selling. Mazagon Dock, Garden Reach, IdeaForge Technology, DCX Systems Ltd and Solar Industries saw negligible MF interest for the month. 
 
Thomas V Abraham, Research Analyst at Mirae Asset Sharekhan sees defence manufacturing boost under Atmanirbhar Bharat, citing export targets of Rs 50,000 crore by FY29. He sees this to benefit firms like HAL and BEL. 

Nuvama in an April 10 note said India is entering a more calibrated phase of the defence upcycle, where incremental ordering pace shall moderate and the focus shifts to execution quality, spending mix and cash flow delivery.

"We continue to prefer defence electronics/subsystem players (BEL, Data Patterns (India) Ltd) and consumable-linked plays (SOIL), given faster execution cycles, lower import dependence and superior margin profile, over integrators such as HAL and BDL, where execution and ordering tempo could be more variable," it said. 

The brokerage said defence sector entered Q4FY26 with robust order visibility, supported by sustained inflows and a healthy pipeline; backlogs are no longer a constraint. However, incremental large-ticket ordering is likely to be more measured with growth increasingly driven by repeat and replenishment orders. While visibility remains strong, the slope of order inflow growth may moderate, it said.

PL Capital in its Q4 preview note said defence companies are likely to report revenue growth of 2 per cent YoY in the March quarter, due to ongoing supply chain disruptions amid geopolitical tensions. Ebitda margin is likely to contract due to an unfavorable mix, it said,

For the quarter, BEL announced OI worth Rs 12,550 crore for Q4FY26. HAL announced orders worth Rs 7,010 in Q4FY26, including Rs 1800 crore order for Dhruv, Rs 2,300 crore order for Dornier and Rs 2900 crore oeder for ALH Mk-III. 

"AoN approved by DAC for FY26 stands at Rs 9.8 lakh crore, with March 2026 AoN of Rs 2.4 lakh crore expected to translate into incremental OI, with BEL, HAL, etc., being key beneficiaries. Continued policy thrust on defense indigenization should further support sustained order booking momentum across multiple platforms and programs like ALH, AMCA and QRSAM," PL Capital said.