India’s defence manufacturing sector is becoming a key part of the nation’s strategic and economic goals. The government has prioritized this sector, with defense exports reaching a record Rs 21,083 Crore in FY 2023-24, up from Rs 686 Crore in FY 2013-14. The defence budget for FY 2024-25 is Rs 6.21 Lakh Crore, making up 13.04 percent of the total Union Budget.
Following are the major defence stocks in which JP Morgan bets an upside potential of up to 50%:
1. Bharat Electronics Ltd (BEL)
The shares of Bharat Electronics Ltd (BEL), with a total market capitalization of Rs 1.85 Lakh Crores on Thursday, as of 1:00 pm were trading at Rs 253 per share which was 1.3 percent down from the previous closing price of Rs 256. The shares are trading at a discount of 26 percent from its 52 week high of Rs 340.5 apiece.
The shares of BEL generated a return of 24.5 percent in the past year, 286 percent in the last three years, and a stellar 844 percent return in the last five years
JP Morgan has an “Overweight” rating on the stock of Bharat Electronics Ltd (BEL) and it is the brokerage’s preferred pick within the defense sector. It sets a price target of Rs 343 on BEL, which implies a potential upside of 33 percent from Tuesday’s closing price of Rs 257.
Bharat Electronics Limited (BEL) is a Navratna PSU that manufactures advanced electronics for the defense sector and has expanded into areas like homeland security, smart cities, space electronics, cybersecurity, telecom, medical electronics, and more.
Also read: Microcap stock in focus after signing ₹138 Cr MoU with Assam Govt for new fiber cement plant
2. Hindustan Aeronautics Ltd (HAL)
The shares of Hindustan Aeronautics Ltd (HAL), with a total market capitalization of Rs 2.19 Lakh Crores on Thursday, as of 1:00 pm were trading at Rs 3,272 per share which was 0.5 percent down from the previous closing price of Rs 3,287. The shares are trading at a discount of 42 percent from its 52 week high of Rs 5,675 apiece.
The shares of HAL generated a return of 7.5 percent in the past year, 398 percent in the last three years, and a stellar 830 percent return in the last five years
The brokerage firm, JP Morgan has also given an “Overweight” rating on Hindustan Aeronautics Ltd and has a target price of Rs 4,958 per share implying an upside potential of 50.8 percent from Tuesday’s closing price of Rs 3,287.
Hindustan Aeronautics Ltd is also a Navratna PSU that is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including aircraft, helicopters, aero-engines, aerospace structures, etc.
JP Morgan’s View on Defense Sector
The Nifty India Defense Index has experienced larger declines compared to the Nifty 50 Index. In the past month, the Nifty Defense Index fell by 12 percent, while the Nifty 50 dropped only 1.1 percent. Over the last six months, the Nifty Defense Index has decreased by 23 percent, compared to a 10 percent decline in the Nifty 50.
JP Morgan highlighted that the negative sentiment following the budget, concerns about government spending, the domestic industrial slowdown, and geopolitical developments have contributed to these corrections. However, it believes these concerns are over-exaggerated.
The firm emphasized that India’s defence capex growth and the push for indigenization are strong and structural. Additionally, expanding defence relations with the US will be a positive development for India’s domestic defense industry.
Written By Adhvaitha Nayani
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.