Indian defence stocks extended gains for a fourth consecutive day, with the sector witnessing a broad-based rally driven by multiple positive developments.

BEL's New Orders and Stock Performance

Bharat Electronics Ltd. (BEL) shares surged 3% following the announcement of new orders worth ₹712.00 crore. The orders span various critical areas including IT Infrastructure and Cybersecurity Solutions, ESM Systems, Blockchain Solution Platform, Communication Equipment, and Spares and Services.

BEL's recent quarterly results showed strong financial performance:

BEL's stock is currently trading at ₹411.70, up 2.18%, with a year-to-date gain of over 40%.

Broader Defence Sector Rally

The rally extended beyond BEL, with other defence stocks also seeing significant gains:

• Cochin Shipyard rose 5.6% to ₹1,923.85
• Garden Reach Shipbuilders & Engineers (GRSE) climbed 7.6% to ₹2,624.85
• The Nifty Defence index gained 2.6% intraday

Potential Fighter Jet Deal

The sector's rally was further fueled by reports that the Defence Ministry is reviewing an Indian Air Force proposal to acquire 114 'Made-in-India' Rafale fighter jets in a deal exceeding ₹2 lakh crore. Key points of the proposed deal include:

• Over 60% of components would be manufactured domestically
• Partnership between France's Dassault Aviation and Indian aerospace companies
• Approval required from the Defence Procurement Board and Defence Acquisition Council
• If approved, India's Rafale fleet would expand to 176 aircraft from the current 36 operational jets

Market Outlook

Market strategist Nischal Maheshwari noted strong five-year visibility for defence companies but cautioned about stretched valuations. He highlighted:

• HAL's ₹2 lakh crore order book
• ₹50,000-70,000 crore backlogs at Mazagon Dock and Cochin Shipyard

Analysts view defence as a structural opportunity supported by Make in India initiatives, though execution capacity remains a limiting factor.

The recent surge in defence stocks reflects growing investor confidence in India's defence sector, possibly fueled by government initiatives to boost domestic defence manufacturing and increased defence spending. As the sector continues to evolve, companies like BEL and others are well-positioned to capitalize on emerging opportunities in both domestic and international markets.

In a remarkable display of investor confidence, defence stocks witnessed a significant surge during Friday's trading session, adding a staggering Rs 43,000 crore to their market value. The Nifty Defence index climbed 4.30% to reach an eight-week peak of 8,041, underscoring the sector's strong performance.

Weekly Gains and Standout Performers

The defence sector's robust showing was not limited to a single day. The Nifty Defence index posted weekly gains of nearly 8%, marking its strongest performance in four months. This upward trajectory was led by a mix of public sector undertakings (PSUs) and private players:

• PSU companies: GRSE, Bharat Dynamics, and Cochin Shipyard
• Private players: MTAR, BEML, and Astra Microwave

Individual stocks in these categories saw impressive gains of up to 10%, contributing to the sector's overall strong performance.

Catalysts for the Rally

The surge in defence stocks coincides with two significant developments:

1. Submarine Negotiations: Talks have begun for six next-generation conventional submarines, potentially opening up new opportunities for defence manufacturers.

2. Ministry of Defence's Modernisation Roadmap: On September 5, the Ministry announced a 15-year modernisation plan, setting the stage for long-term growth in the sector.

Substantial Order Books

Market analysts have pointed out the robust order books of key players in the defence sector:

These substantial order books indicate a strong pipeline of projects and potential revenue streams for these companies.

Technical Indicators

The Nifty Defence index has shown positive technical signals:

• Breaking a downward trendline
• Moving above key averages
• Daily Relative Strength Index (RSI) crossing 60 for the first time since June

These indicators suggest a potential shift in momentum for defence stocks.

Long-term Growth Prospects and Cautionary Note

Experts emphasize the long-term structural growth story of the defence sector, driven by government initiatives to promote domestic defence manufacturing. However, they also caution that near-term visibility may already be reflected in current valuations.

As the defence sector continues to evolve under the government's 'Make in India' initiative, investors and industry watchers will be keenly observing how these market movements translate into sustained growth and development in India's defence manufacturing capabilities.