Shares of defense companies, which were once market favorites, experienced another decline on October 22 as broader selling hit the small and mid-cap sectors. Notable stocks such as Mazagon Dock Shipbuilders, Garden Reach Shipbuilders, and Bharat Dynamics, which had previously led a two-year rally in defense, fell between 6% and 9%. Other companies like Hindustan Aeronautics, Bharat Electronics, Paras Defence, and Astra Microwave also saw drops of 3% to 4%. The defense sector had previously attracted significant inflows, fueled by optimistic growth expectations linked to the government’s push for indigenization of defense equipment, resulting in many defense stocks soaring over 100% as investors continued buying regardless of entry prices.
However, concerns about high valuations have triggered profit-booking, leading to a sharp pullback in defense stocks from their record highs. Although the outlook for defense companies remains strong, the stretched valuations—far exceeding their performance—have alarmed investors. Even after the recent correction, valuations haven’t yet reached reasonable levels.
In the September quarter, more than 55 out of 68 public sector undertakings (PSUs) saw an increase in retail shareholders, despite a decline in stock prices. Canara Bank added 446,000 new retail investors, followed by IREDA with 374,000, Bank of Baroda with 300,000, and HUDCO with 287,000. However, these stocks have fallen 20-30% from their 52-week highs.
DII Investment Surpasses ₹4 Lakh Crore in 2024; October Inflows Reach ₹63,981 Crore Amid ₹67,310 Crore FPI Outflows, with Mutual Funds Investing ₹23,300 Crore in Equities and LIC Committing ₹1.3 Lakh Crore for the Fiscal Year.
Shares of several government-backed companies in India, especially in the railway and defense sectors, have recently declined following a significant increase. This drop is primarily attributed to foreign investors offloading their shares. Currently, 14 companies in the Nifty CPSE Index have experienced price drops of over 10% from their peak levels in the past year, while seven others have fallen by approximately 5%.
Update
Mazagon Dock Shipbuilders’ board has decided to split its stock in a 1:2 ratio, meaning each share will be divided into two. The company has also announced an interim dividend of Rs. 23.19 for each fully paid-up equity share of Rs. 10 for the financial year 2024-25.
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