Mutual funds sold shares worth Rs 1,700 crore in the defense sector.
The speed in the defense sector for some time has now seen stopping. Mutual funds have sold a huge selling of about Rs 1,700 crore in nine defense stocks last month. The rally in Defense Stocks after Operation Sindoor is now under pressure due to expensive valuation. Investors now feel that the prices of these shares have increased excessively.
Why did mutual funds sell shares?
After Operation Sindoor, the Defense Budget Target of the Government of India and NATO’s defense budget target brought the defense sector to new heights. But now the valuation has become so much that big investors are selling shares. According to the Prime Database, Solar Industries had the highest selling of Rs 952 crore. After this, shares worth Rs 192 crore were sold in Jane Technologies and Rs 165 crore in Bharat Forge. 153 crore was sold in GRSE, Rs 120 crore in Cochin Shipyard and Rs 96 crore in Majgaon Dock. Overall shares worth Rs 1,713 crore were sold.
At the same time, shopping was only Rs 100 crore, including stocks like India Dynamics, Unimach and BEL. The effect of this selling was also seen on share prices. The Nifty India Defense Index fell 4% in the last one month. GRSE, Estra Microwave and Cochin Shipyard declined by double -points, while solar industries fell 9% and HAL 3%.
Experts are making distance from defense stocks
The biggest supporters of the defense sector are also taking precautions now. Vikas Khemani of Carnelian Asset Management said, “We are keeping distance from defense stocks. There is more enthusiasm in the market about these shares, which can be dangerous.” Khemani says that he is not completely out of the defense sector, but will now invest in select companies.
At the same time, Ambareesh Baliga pointed to another danger. He said, “Valuation is quite expensive at this time. The real problem is about delivery and examination. Many companies have orders up to six-eight years, but if they do not increase their capacity, then there will be problems.” Baliga gave the example of HAL, where reports of delay in delivery have already been revealed.
Motilal Oswal has given a ‘neutral’ rating on India Dynamics (BDL) and has a target price of Rs 1,900, which was 4% less than the market price of that time. Brokerage said that BDL has many orders, but the price of stock has increased so much that now there is less scope to go up and up. CIO Equity Harsha Upadhyay, CIO of Kotak AMC also said, “Valuation is more, so we are not increasing our positions right now.”
Growth can be found in long term
However, the long -term story of the defense sector is still strong. NATO is getting a target of 5% defense expenses by 2035 and the sector is getting support from the 1 trillion rupee Defense Acquisers Approval in India. Nuwama says that the defense electronics segment may grow 7-8% annual growth in the next five years. Their top pics include BEL and data patterns.
ICICI Securities also said that the order inflow in FY26 will be strong. Stocks like solar industries, estra microwave and Azad engineering can show growth of 25-30%. HAL, BEL and Midhani are their choice at DPSU.
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