Why defence stocks HAL, BEL, Bharat Dynamics rallied today?

Shares of defence stocks extended their gaining streak for the second straight session on Thursday, with state-owned Hindustan Aeronautics and Bharat Electronics hitting their record highs, while Bharat Dynamics surged over 6% in intraday trade. The defence stocks were on a roll after the Defence Acquisition Council (DAC), headed by Defence Minister Rajnath Singh, approved arms procurement proposals worth ₹28,732 crore under buy (Indian IDDM) and buy (Indian) categories giving a further boost to ‘Aatmanirbharta’ in defence. The new order inflows provided a brightened outlook for these domestic defence companies.

Shares of aerospace and defence company Hindustan Aeronautics Limited (HAL) rose as much as 5.05% to touch a new all-time high of ₹2036.4 on BSE. The stock finally settled day’s trade at ₹2,027.90, up 4.61% against the previous closing price of ₹1,938.45, driven by strong volume as 0.44 lakh shares changed hands over the counter as compared to two-week average volume of 0.37 lakh scrips. The counter has gained 7.8% in the last two sessions.

The company in an exchange filing on Wednesday said it has signed a contract worth over $100 million with Honeywell for HTT-40 Engines. The deal includes supply and manufacture of 88 TPE331-12B engines/kits along with maintenance and support services to power the Hindustan Trainer Aircraft (HTT-40).

"HAL has successfully developed Basic Trainer Aircraft (HTT-40) to address the basic training requirements of the IAF. There is a potential requirement of 70 aircraft. The contract for the same with IAF is under advanced stage of approval", said R Madhavan, CMD, HAL.

Similarly, shares of Bharat Electronics Ltd (BEL) also climbed 1.4% to scale a new height of ₹276.95 on the BSE. Paring some of early gains, the PSU stock ended 0.3% lower at ₹272.30, against the previous closing price of ₹273.20 on the BSE.

Bharat Dynamics also received strong response from the investors, with share price jumping as much as 7.9% in intraday to ₹788.95 on the BSE. Finally, the shares of the company closed at Rs ₹782.65, up 7.05%.

The defence ministry on July 26 approved the procurement of guided extended range rocket ammunition and infantry combat vehicles for the Indian Army, Marine Gas Turbine Generator for Navy, and 14 Fast Patrol Vessels (FPVs) for Indian Coast Guard.

“Among the proposals approved by DAC in the meeting are three proposals of the Indian Army, viz. Guided Extended Range Rocket Ammunition, Area Denial Munition Type I and Infantry Combat Vehicle – Command have been designed and developed by DRDO. The total value of these three proposals is ₹8,599 crore,” the ministry said in a release.

As per the release, DAC also approved Navy’s proposal to procure an upgraded 1,250KW capacity marine gas turbine generator for power generation application onboard the Kolkata class of ships through the Indian Industry. This will give a major boost to the indigenous manufacturing of gas turbine generators.

In order to enhance the security in the coastal region of the country, the DAC also gave a nod to the proposal of procurement of 14 Fast Patrol Vessels (FPVs) for the Indian Coast Guard.