India’s ban on import of defense arms lead to a surge in the stocks of domestic defense companies

  • 12-Aug-2020
  • India’s ban on import of defense arms lead to a surge in the stocks of domestic defense companies

The Indian government on Sunday announced a ban on the import of 101 defense weapons to provide momentum to Prime Minister Modi’s ‘Atmanirbhar Bharat Abhiyan, ’ which stands for the Self Reliant India Movement. This could propel the weapon production of the country’s defense companies. The companies are expected to have more contracts in the future for the development of weapons owing to the ban.

The share prices of established companies such as Bharat Heavy Electronics Limited (BHEL), Larsen & Toubro, Bharat Forge, and Hindustan Aeronautics Limited (HAL) and other defense weaponry manufacturing companies are soaring in the stock market as of now. HAL reported a stunning opening of 8% on Monday, which was higher than the closing on Friday. The demand for high-end military items like Light Combat Aircraft (LCA) MK I A is a huge perk for the companies designing and manufacturing aircraft. The other giant in the defense filed, L&T observed a surge in the share price by 2% in the early hours of trading. L&T is expected to benefit the most from the new policy as it supplies the Army as well as the Navy. Bharat Forge, another major company, reported a share jump by 5% during the trading hours, and the Chairman and MD, Baba Kalyani, embraced the new policy with open arms. Cochin Shipyard, which manufactures numerous items for the Indian Navy, saw a boost in the stock shares by 4%. This led to a 44% jump in profits on year-on-year in the Q4 even as the company bore the brunt of the COVID-19 pandemic. However, the details of the impact would be declared as the company gears to announce the Q1 earnings later today. BHEL saw a share jump of approximately 3%; however, it suffered a staggering 54% dip in sales due to the pandemic. The public-owned shares of BHEL also saw a surge of 3%.

Although the complete ban will conclude in December 2025 as per the implementation in phases, several items are expected to be dismissed from December 2020. According to the Defence Minister of India, Rajnath Singh, this move is to one day accomplish the export of defense items for the rest of the world.


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