Defense sector is seeing significant momentum on Tuesday, significantly above the gains seen in the wider market amid a string of bullish analyst reports.
The Motilal Oswal Nifty India Defense ETF is up 1.1% at the time of writing, significantly higher than the 0.36% gain in Nifty 50 and 0.33% gain in Sensex today.
Defense stocks outperforming: Among top performers, Solar Industries India is up nearly 4% to trade at ₹10,050 and Data Patterns is up 1.93% at ₹2,528.60.
Small-cap defense stock DCX Systems is trading nearly 5% higher and Garden Research is up 1.1% as well.
What’s going on? The surge is following at least three analyst reports this week from Nomura, Phillip Capital and Elara Securities.
Nuvama named Bharat Electronics and Data Patterns as its top picks as it expects 2025 to be a a bullish year for the defense sector in India with orders for larger programs, as reported by NDTV.
There could be $130 billion defense expenditure over the next five years in India according to Nuvama analysts.
Elara meanwhile sees 30% upside to Hindustan Aeronautics to current market price, over 18% to Bharat Electronics and pinned a 6% higher target to Garden Reach Shipbuilders.
Phillip analysts initiated coverage on the Indian defense sector as a “compelling investment theme” with long-term execution in sight.
It recommends buy for Data Patterns, Bharat Electronics and Hindustan Aeronautics with over 30% upside from the current levels and is neutral on Solar Industries and Bharat Dynamics, seeing smaller bandwidths for run-ups in stock prices.
How to bet on wider defense market?
Motilal Oswal provides a Defence mutual fund and ETF and HDFC has a defense mutual fund as well.
Valuation concerns have run high amid the sudden popularity of the defense stocks since 2023 and HDFC had to stop both lumpsum and systemic investment plans (SIPs) into its defense mutual fund over it.
Retail investors may also consider index funds to gain wider exposure instead of sector or theme-based fund, which present a significant risk in the absence of clear fundamental research and diversification strategy.
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