Defence stocks gain as US and India sign non-binding Security of Supply Arrangement

Defence stocks rose on Friday after the U.S. Department of Defense (DoD) and the Ministry of Defence of the Government of India entered into a bilateral, non-binding Security of Supply Arrangement (SOSA).

The U.S. DoD said in a release that the SOSA was signed by Vic Ramdass, Principal Deputy Assistant Secretary of Defense for Industrial Base Policy, on behalf of the United States, and Samir Kumar Sinha, Additional Secretary and Director General (Acquisitions), on behalf of the Indian MoD.

Through the agreement, the United States and India have agreed to provide reciprocal priority support for goods and services that promote national defence. The arrangement will enable both countries to acquire the industrial resources they need from one another to resolve unanticipated supply chain disruptions to meet national security needs, the release stated.

Ramdass pointed out that the SOSA represents a pivotal moment in the U.S. – India major defence partner relationship and will be a key factor in strengthening the U.S. – India Defense Technology and Trade Initiative (DTTI).

“I look forward to Secretary of Defense for Acquisition and Sustainment OUSD(A&S) hosting the next DTTI meeting this fall to deepen cooperation between our respective defence industrial bases and pursue bilateral co-development, co-production, and co-sustainment initiatives,” he said.

Under the agreement, the U.S. and India have committed to support each other’s priority delivery requests for the procurement of critical national defence resources. The U.S. will provide India assurances under the U.S. Defense Priorities and Allocations System (DPAS), with programme determinations by DoD and rating authorisation by the Department of Commerce (DOC).

India, on the other hand, will establish a government-industry code of conduct with its industrial base, where Indian firms will voluntarily agree to make every reasonable effort to provide the U.S. priority support.

Defence stocks in India have been on an uptrend this year, with Hindustan Aeronautics (70.93%), Bharat Dynamics (52.64%), Paras Defence and Space Technologies (71.93%), Bharat Electronics (66.10%), and Cochin Shipyard (207.47%) registering significant gains on a year-to-date basis.