Mazagon Dock, Cochin Shipyard, HAL, other defence stocks tumble up to 9%

Paras Defence and Space Technologies tumbled to Rs 1,241 per share on the NSE, down 2.19 percent.

Defence stocks came under heavy selling pressure on August 20 with Mazagon Dock slipping into deep red, declining over 9 percent.

The analysts at the domestic brokerage ICICI Securities had forecast a 77 percent decline in the shares of Mazagon Dock Shipbuilders from Friday's closing levels despite a strong June quarter performance.

Mazagon Dock stock fell to an intraday low of Rs 4278.8 per share on the Bombay Stock Exchange (BSE), declining 9.4 percent from its previous close. The counter has been falling for the last three days and has fallen 13.85 percent during the period.

Mazagon Dock scrip has corrected 26 percent from its record-high levels, which it had hit in July amid mega rally in defence stocks.

The contagion spread to other defence stocks as well with most of them slipping into red. Cochin Shipyard share price was down 4.01 percent to Rs 2,069.10 per share on the NSE today. Intraday, it declined to Rs 2039.5 per share, down 5.34 percent.

Paras Defence and Space Technologies tumbled to Rs 1,241 per share on the NSE, down 2.19 percent.

Hindustan Aeronautics Ltd's shares fell 1.18 percent to Rs 4,735.80 per share on the NSE. In the last one year, it climbed 150.26 percent, as compared to Sensex which rose 24.37 percent.

Shares of Mishra Dhatu Nigam fell 1.77 percent to Rs 426.90 per share while Zen Technologies was down to Rs 1,690. Bharat Dynamics share price was down 1.62 percent to Rs 1,309 per share.

The counter of Garden Reach Shipbuilders declined sharply by 7.79 percent. It touched an intraday low of Rs 1751,6 per share, down 8.82 percent. For this stock too, ICICI Securities sees 73 percent decline.

Earlier this year, Defence Minister Rajnath Singh said the government has a target to export over Rs 50,000 crore worth of defence equipment by 2028-2029.

The fiscal year 2023–2024 saw a record-breaking Rs 21,083 crore in defense exports.

PM Modi-led government at the Centre is focused on self-reliance in defence which led to the sector`s meteoric rise. Initiatives like import curbs on defence equipment and a push for exports are creating opportunities for the domestic companies in the defence sector.

Time for bottom fishing or more pain lies ahead?

VLA Ambala, a SEBI-registered Research Analyst and co-founder of SMT, said now is not the ideal time to enter these stocks and that their support levels lie much below the current price.

"Mazagon Dock, Cochin Shipyard, and HAL stocks have offered decent returns in the last 6 months. However, their current prices have declined significantly from their all-time highs. If we factor in their valuations, these outperforming stocks are currently overpriced and overvalued and do not justify their PE ratios. Hence, I expect profit booking to take place soon. Based on these aspects, now is not the ideal time to enter these stocks, and I expect a further decline in their prices. Nevertheless, those interested can explore the potential dip buying opportunities that could arise soon. For instance, traders and investors willing to explore HAL should avoid its current price of Rs 4,750 and enter the dip buying range of Rs. 4,000-4,200. I encourage them to set a target price of Rs 5,200-7,500 and hold the stock for 1-15 months, given they adhere to a suggested stop loss of Rs 3,650.

"For the Cochin Shipyard, they can consider the dip buying range of Rs 1,350–1,480 against its current price of Rs 2,075. Market participants can target a price range of Rs 1,750–26,000 and hold it for 5–10 months while following the stop loss of Rs 1,200. Meanwhile, for Mazagon stock, they can consider the dip buying range of Rs 3,500–3,700 for a target of Rs. 4,500–7,500. They may hold the stock for 3–8 months but set their stop loss at Rs 3,000 to cushion the risk," said Ambala.

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