Shares of defence companies seem to be on fire in 2022. Despite the volatility in the broader market, stocks such as Bharat Dynamics, Hindustan Aeronautics, and Bharat Electronics have risen in the range of 60% to 120% so far this year. Let’s look at some of the key factors that have put defence stocks in the limelight.
Big govt push
Over the past few years, the Indian government has taken several initiatives that have promoted domestic manufacturing of defence equipment. This indigenisation drive is offering immense opportunities to domestic defence companies.
For instance, in August 2022, the Defence Ministry approved the third positive indigenisation list (PIL) of 780 items to be manufactured in the domestic market. This list is a follow-up to the previous two PILs, which had around 2,500 items that have already been indigenised. These PILs will further curtail defence imports and amplify prospects for domestic players.
Rising demand
India’s defence exports are also on the rise. In FY22, the country’s defence and technology-related export rose by over 54% compared to the previous year, clocking the highest ever figures of ₹12,815 crore. India’s BrahMos missile is now being exported to the Philippines, while Hindustan Aeronautics, which makes Tejas fighter jets is one of the front-runners to grab a major deal from the Royal Malaysian Air Force (RMAF).
Inflation threat
Backed by supportive government initiatives, defence stocks seem to be firing on all cylinders. However, global inflationary pressure can potentially hurt export growth and derail the stock rally.
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