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Last Updated : May 18, 2020 10:19 AM IST | Source: Moneycontrol.com

Defence stocks rally 4-10% as govt ups FDI limit, pushes for Make In India

Also another news which pretty much liked by the market was the hike in foreign direct investment limit from 49 percent to 74 percent and the notification on the same is expected to be soon.

Live demo being performed at the Defence Expo earlier today. (Image: Twitter/@DefExpoIndia)
Live demo being performed at the Defence Expo earlier today. (Image: Twitter/@DefExpoIndia)
 
 
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Shares of defence companies gained in the range of 4-10 percent in morning on May 18 after the government increased its more focus towards making defence products in India through 'Make In India' mission rather than increasing import bill of the country.

Also another news which pretty much liked by the market was the hike in foreign direct investment limit from 49 percent to 74 percent and the notification on the same is expected to be soon.

As a results, Hindustan Aeronautics was up 6.21 percent at Rs 556, Bharat Electronics up 1.4 percent at Rs 68.70, Mishra Dhatu Nigam up 4.65 percent at Rs 219.25 and Bharat Dynamics gained 2.67 percent at Rs 246, while Apollo Micro Systems was up 3.52 percent at Rs 91.15, BEML up 2.42 percent at Rs 612.65, Bharat Forge up 1.13 percent at Rs 280.70 and Premier Explosives rose 3.87 percent to Rs 77.85 on the BSE at 9:37 hours IST. However, Larsen & Toubro was down 3.07 percent at Rs 837.65.

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While presenting fourth tranche of Rs 20 lakh crore financial package, Finance Minister Nirmala Sitharaman on May 16 said with the Prime Minister Narendra Modi's initiative towards making Self Reliant India', the government has been enhancing self-reliance in defence production as well.

"We are notifying a list of weapons/platforms for ban on import with year wise timelines; we will focus more on indigenisation of imported spares; and there will be a separate budget provisioning for domestic capital procurement, which all will help reduce huge defence import bill of the country," she explained.

She said the government would improve autonomy, accountability and efficiency in ordnance supplies by corporatisation of ordnance factory board.

The time-bound defence procurement process and faster decision making will be ushered in by setting up of a project management unit (PMU) to support contract management; realistic setting of general staff qualitative requirements (GSQRs) of weapons/platforms; and overhauling trial and testing procedures, she added.

Experts feel this is a great move as the defence bill will gradually be reduced.

"India will also stop importing weapons that can be made at home, even the spares of these weapons have to be manufactured locally. This will help reduce a huge defence import bill," Kedar Shahoo Kadam, DGM & Head Research at Cholamandalam told Moneycontrol.

Global brokerage house Jefferies said November 2014-March 2017 saw concrete decision making in defence indigenisation and of $28 billion sanctioned, $14 billion carved out for domestic manufacturing. "Hence we could see a lift in domestic manufacturing again."

The research firm has a buy call on Bharat Electronics and L&T with target price of Rs 68 & Rs 864 per share respectively.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on May 18, 2020 10:19 am
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