Defence stocks weather storm by generating alpha returns; its majority stocks turn into multibaggers with Astra Microwave surging 256 per cent!

Three of these stocks have risen by more than threefold

In the first half of 2022, when most of the stocks were bleeding red and the broader markets were on a downhill ride, there was one sector that gained investors’ attention and outperformed the markets. This sector not only defended its investors’ interests but also, managed to help them generate alpha. The sector that we are talking about is the defence sector.   

So, let’s know how the defence sector weathered the storm during the first half of 2022!  

The Indian defence sector, which is the second-largest armed force, is at the cusp of revolution. The government has identified this sector along with aerospace as a focus area for Aatmanirbhar Bharat or Self-Reliant India initiative with a formidable push on the establishment of indigenous manufacturing infrastructure supported by a requisite research & development ecosystem. The vision of the government is to achieve a turnover of USD 25 billion including export of USD 5 billion in aerospace and defence goods & services by 2025.          

India is positioned as the third-largest military spender in the world with its defence budget accounting for 2.15 per cent of the country’s total GDP. Over the next 5-7 years, the Government of India plans to spend USD 130 billion for fleet modernisation across all armed services. As per Union Budget 2022-23, USD 70.6 billion was allocated to the Ministry of Defence. In line with the Self-Reliant India initiative, the share of domestic capital procurement, which was earmarked at 64 per cent in 2021-22, has been enhanced to 68 per cent of the capital acquisition budget of the defence services for FY 2022-23.  

Here is the performance of defence stocks since December 31, 2019, to date: 

So, the above table shows how all the stocks have delivered positive returns. Now, comes the most interesting part. Out of these seven stocks, six of them turned into multibagger ">Multi-baggers! With the top gainer being Astra Microwave Products, followed by Zen Technologies and Hindustan Aeronautics, three of these stocks have risen by more than threefold while stocks like Bharat Electronics, Bharat Dynamics & Solar Industries India jumped more than twofold.   

Note: We have considered stocks that were trading on the bourses as of December 31, 2019. Nevertheless, other stocks also got listed in this sector on the exchange thereafter.