Shares of defence companies have witnessed mega rally amid government's focus on self-reliance (Atmanirbhar Bharat) in the defence sector. Import curbs, push for defence exports and increasing FDI in the sector further drove the sector's meteoric rise.
However, of late, many PSU defence stocks have witnessed profit taking.
PSU defence stock Cochin Shipyard share price has declined 26.80 percent in the last 1 month. In Monday's trade, it declined over 1.62 percent to quote at Rs 1,856 per share on the NSE. It dropped 13.81 in just two weeks alone.
Cochin Shipyard's stock has been losing for the four days and has fallen 10.32 percent in the period.
Mazagon Dock Shipbuilders was no different to the larger profit booking in the pack with stock slipping 17.52 percent in the last one month over profit booking by the investors. It dropped 11.01 percent in the last two weeks. Another PSU defence stock Bharat Dynamics also joined the pack to extend losses of over eight percent in the last one month.
The shares of Mazdock and Cochin Ship among the PSU Defence basket have offered multi-bagger returns from the last year. As a result, the stocks have now succumbed to profit booking leading to a deteriorating price strength compared to the market indicating potential signs of exhaustion.
What investors should do?
Kushal Gandhi, Technical Analyst at StoxBox explained that the relative strength index across daily and higher timeframes has observed a negative slope indicating waning momentum. "We do not anticipate the continuance of the primary uptrend, however, a short recovery can be on the cards," he added.
Shares of Premier Explosives, which manufactures solid propellants for India's prestigious missile programmes like Akash, Astra, and LRSAM too dropped 17.15 percent in the last 30 days.
In fact, not just the defence segment, larger profit taking was witnessed in the PSU sector. IREDA share price declined over 6 percent in the last one month while HUDCO declined over 10 percent in the period.
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