HAL’s share price jumps by over 8% as defence stocks rally after India announces import ban

Defence stocks rally after India's domestic defence manufacturing industry is poised to see a boost after the Indian government placed a import ban on 101 defence itemsBCCL

  • India’s defence manufacturing industry will have more contracts coming its way with the Indian government banning the import of 101 defence items.
  • The share price of companies like L&T, BHEL, Bharat Forge and others rallying in the stock market today.
  • Hindustan Aeronautics Limited’s (HAL) share price was up by over 8% in early morning trade.
The Indian government’s ban on the import of 101 defence weapons and military platforms could bring an additional impetus for India’s defence companies.

The share prices of companies like Bharat Heavy Electronics Limited (BHEL), Larsen & Toubro (L&T), Hindustan Aeronautics Limited (HAL), Bharat Forge and others are rallying in the stock market today.

HAL opened a whopping 8% above Friday’s closing. The ban on big-ticket items like the Light Combat Aircraft (LCA) MK I A is a huge boon for the aircraft manufacturing company.

HAL's share price since 1 January 2020BSE/BI India

The other behemoth in the defence space, L&T, saw its share price go up by over 2% in early morning trade. It has the most to gain from this new move coupled with the overarching Defence Production and Export Promotion Policy (DPEPP) 2020. Not only does the company manufacture for the Army but for the Navy as well.

L&T's share price since 1 January 2020BSE/BI India

Bharat Forge's chairman and managing director, Baba Kalyani, welcomed the India's government's move to ban 101 defence items. "This strategic step will propel the Atmanirbhar Bharat " he said. As markets opened today morning, the Bharat Forge's shared price jump by over 5%.

Bharat Forge's share price since 1 January 2020BSE/BI India

Cochin Shipyard also saw its stock in the green, up by nearly 4%. Its one of the few companies that manufactures items for the Indian Navy. Even though the company was not immune to the effects of the coronavirus pandemic and the ensuing lockdown, it still managed to post a 44% jump in profits year-on-year in the fourth quarter. The true impact of the uncertainty with be reflected in its first quarter earnings, which are set to be announced later today.

Cochin Shipyard's share price since 1 January 2020BSE/BI India

BHEL’s share price saw a jumped of nearly 3%. The company saw a troubled fourth quarter will sales dipped by 54% and a net loss of ₹ 1,532 crore. Due to the impact of COVID 19 and the uncertain circumstances, the board of BHEL also refrained from recommending the final dividend for the financial year.

BHEL's share price since 1 January 2020BSE/BI India

The publicly owned BEML's share price also saw a surge of over 4%. Just last month, the company bagged a ₹ 557 crore order from the Ministry of Defence (MoD) to supply 1,512 Track Width Mine Ploughs (TWMPs). Its a demining piece of equipment used by India's Bhishma T-90 tanks.

BEML's share price since 1 January 2020BSE/BI India

Even though the ban will be implemented in a phased manner with a deadline of coming into full effect by December 2025, many items will be shunned as soon as December this year. This includes big-ticket items like the Light Combat Aircraft (LCA) MK I A and smaller tit-bits like bulletproof jackets and ballistic helmets.

Boon for India’s domestic defence manufacturing
Branch of the Armed ForcesCompanies to Benefit
Indian ArmyL&T, BHEL, Bharat Forge, BEML, BEL and Bharat Dynamic
Indian NavyGarden Reach, Cochin Shipyard, and L&T
Indian Air ForceHAL and Dynamatics Technologies
Source: Reliance Securities

According to Rajnath Singh, India’s Minister for Defence, the aim is not only to reduce India’s dependence on imports and boost the domestic market but also to one day export defence items to the rest of the world.

He estimates that contracts worth nearly ₹4 lakh crore will be placed upon the domestic industry within the next six to seven years.

India’s Defence Ministry introduces “import embargo” on 101 items to boost Atmanirbhar Bharat Abhiyan

All the 101 items that India's Defence Ministry will put under "import embargo"