A spectacular rally was seen in the stock market on the last trading day of the week. The market’s main index Sensex is trading at a pace of about 400 points. Meanwhile, shares of major defense companies of the country have also increased. The Nifty India Defense Index moved up nearly 2% on buying in defense stocks in morning trade on Friday, February 20 amid rising tensions between US-Iran.
On the National Stock Exchange (NSE), the Defense Index jumped 2.11% to reach the day’s highest level of 8,205. Although the index is up 51% in a year, it is down 11% from its all-time high of 9,195.
Defense stocks rose by 9%
All the defense index stocks were trading with gains, with Data Patterns emerging as the best performer, rising 9% to Rs 3,190. Apart from this, there was also a rise in the shares of Paras Defense and Space Technologies and MTAR Technologies. With this, shares of Bharat Dynamic Limited rose by about 4%. Shares of Hindustan Aeronautics Limited and Bharat Electronics Limited went up 2-2%. BEML Limited, Mazagon Dock Shipbuilders Limited and Cochin Shipyard Limited were also trading higher as all defense stocks witnessed gains.
Why are defense stocks rising today?
At a time when the increasing tension between the US and Iran has created an atmosphere of fear in the world markets and increased oil prices, buying in defense stocks has increased. According to many media reports, military activity has intensified in the Middle East. US President Donald Trump on Thursday warned Iran that it will have to make a compromise on its nuclear program, otherwise bad things will happen. It seems that a time limit of 10 days has been set before the US takes action.
According to a Reuters report, the US has deployed aircraft carriers, warships and fighter jets in this area. At the same time, according to the US government website, Iran has issued a notice to pilots that it is preparing to launch rockets in the southern part of the country. Ventura’s research head Vineet Bolingkar said that the prediction market is predicting a 57% probability of a US strike by March. In view of the deployment of US warships in the Middle East, investors are looking at the defense sector as a kind of security shield.
Market expects defense spending
Harshal Dasani, Business Head, INVasset PMS, said that due to increasing geopolitical tension, countries are rethinking their security expenditure. The market expects that there will be more expenditure on defence, orders will be received sooner and governments can increase the stock of weapons.
He said that defense stocks become a technical head i.e. hedge option at such times, because government expenditure is not so much affected by the economic cycle. But he also said that the real reason for the rise now is geopolitical tension. Whether this rally will last further or not will depend on new orders, pace of work and the defense capex policy in India.