Indian defence stocks surge 13% following record defence production growth
Indian defence companies experienced a significant surge in their shares, with some seeing up to a 13% increase on July 5. This followed an announcement by Defence Minister Rajnath Singh that India's defence production had achieved its highest ever growth in the fiscal year 2023-24. The value of production reached ₹1,26,887 crore during this period, marking a substantial increase of 16.8% compared to the previous financial year.
Government's commitment to boost defence manufacturing
Singh announced this record growth on social media platform X, emphasizing the government's commitment to fostering a conducive environment for India as a leading global defence manufacturing hub. Prime Minister Narendra Modi also lauded this achievement, expressing his dedication to nurturing a supportive atmosphere for enhancing India's defence manufacturing capabilities. This announcement led to significant growth in trade shares of defence companies such as Bharat Dynamics, Bharat Electronics, Hindustan Aeronautics, Cochin Shipyard, and Data Patterns.
Defence index fund reflects bullish market trend
The bullish trend in the defence sector is also reflected in the strong subscription numbers of the Motilal Oswal's Nifty India Defence Index fund. The fund raised ₹1,676 crore during its New Fund Offer (NFO) period, marking the highest collection ever by an equity index fund during its NFO period. The Nifty India Defence Index has shown solid performance over the past one and three years, achieving compounded annual growth rates of 177% and 89.5%, respectively.
Government targets and policy reforms boost defence sector
Centre has set a target of achieving domestic defence manufacturing worth ₹1,75,000 crore, including defence exports of ₹35,000 crore by the fiscal year 2024-25. In mid-June, Singh set an ambitious goal to export over ₹50,000 crore worth of defence equipment by 2028-2029. To achieve these objectives, several policy reforms have been introduced to ease business operations and integrate micro, small and medium enterprises (MSMEs) and startups into the supply chain.
Record defence exports and production contributions
India's defence exports reached a record of ₹21,083 crore (approximately $2.63 billion) in FY 2023-24, translating to a 32.5% growth over the previous fiscal year. This figure indicates that defence exports have grown 31 times over the last decade compared to 2013-14. The Ministry of Defence stated that about 79.2% of the total value of production in 2023-24 was contributed by Defence Public Sector undertakings (DPSUs) and other PSUs, while the private sector contributed around 20.8%.
