Shares of Hindustan Aeronautics, Cochin Shipyard among other defence stocks recouped their morning losses as Defence Secretary RK Singh said the govt is is looking to increase the defence expenditure in the coming years to 2.5 percent of the Gross Domestic Product (GDP).
Hindustan Aeronautics shares had declined 0.76 percent to Rs 4,955 per share on the NSE. However it recovered most of the losses and was trading at 5,009.3 per share at around 3 p.m. Cochin Shipyard shares were trading at Rs 2,050.9, down marginally by 0.3 percent.
The up move was seen after Defence Secretary told CNBC-TV18 that "We will seek to increase defence expenditure share in GDP from 1.9% to 2.5%." He said the country's defence infrastructure would need additional allocation for the defence budget in the long run.
"We are going to be seeking an additional allocation in the five-year cycle of the 16th Finance Commission," Singh said, stating that the Ministry of Defence is expected to meet the quarterly expenditure targets.
Shares of defence companies including Paras Defence, Bharat Electronics Ltd (BEL) and Garden Reach Shipbuilders & Engineers (GRSE) fell sharply in Monday's trade as investors booked profits following a recent rally.
The Nifty Defence index slipped over 1 percent during the session, erasing gains made in the previous trading day, when it had ended 1 percent higher.
Paras Defence and Space Technologies led the losses, falling 7.84 percent to hit an intraday low of Rs 860.4 on the NSE. The stock declined after rising for four straight sessions.
GRSE and BEL also came under pressure, dropping 2.15 percent and 2.03 percent, respectively.
Among other defence stocks, Mazagon Dock Shipbuilders, Cochin Shipyard, and Hindustan Aeronautics declined up to 1 percent.
In contrast, shares of DCX Systems rose over 4 percent to touch an intraday high of Rs 297 on the NSE. The stock, which opened 2.19 per cent higher, has now gained nearly 6 percent in two sessions. The rise comes after the company received an industrial licence to manufacture defence equipment.
In addition, easing geopolitical tensions also weighed on sentiment. Stocks were under pressure after Israeli Prime Minister Benjamin Netanyahu said on Sunday that Israeli negotiators had been given clear instructions to secure a ceasefire deal in ongoing talks in Doha. He also stated that discussions with U.S. President Donald Trump could help advance a Gaza hostage release and ceasefire agreement, with Trump predicting that a deal could be reached within the week.
The prospects of a temporary ceasefire or easing of conflict in the region could reduce short-term global demand for defence equipment and services, especially from countries looking to boost procurement in response to war-related tensions. This in turn dampened sentiment for Indian defence exporters, who had seen buying interest amid expectations of new orders.
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