Defence Stocks Rally as Elections 2024 Approach

As Elections 2024 draw closer, a surge in defence-related stocks has been witnessed, with several smallcap shares experiencing significant rallies. While the broader market saw a modest 2% increase on both the Sensex and Nifty since the start of the Lok Sabha elections on April 19, a handful of smallcaps have outperformed.

RattanIndia Power stands out as the top performer with a remarkable 101% surge in its stock price during the election rally. Notably, companies like Cochin Shipyard, Bharat Dynamics Ltd, Garden Reach Shipbuilders & Engineers Ltd, and Mazagon Dock Shipbuilders Ltd also delivered impressive returns. Other notable gainers include Shakti Pumps (India) Ltd, Johnson Controls – Hitachi Air Conditioning India Ltd, Century Enka Ltd, Finolex Cables Ltd, and Jupiter Wagons Ltd.

Analysts advise investors to stay cautious and prioritize quality stocks, preferably largecaps, amidst the market volatility leading up to the election results. While smallcaps have shown strength, the potential post-election market fluctuations highlight the importance of stability in investment choices.

Defence stocks, in particular, have been on the rise due to expectations of political continuity with the BJP likely to retain power. Cochin Shipyard Ltd saw an impressive 87% increase in its stock price, while Bharat Dynamics Ltd surged by 70% during the election period. Additionally, Garden Reach Shipbuilders & Engineers Ltd and Mazagon Dock Shipbuilders Ltd experienced gains of 67% and 56% respectively.

Noteworthy stocks in other sectors include Johnson Controls – Hitachi Air Conditioning India Ltd, Allsec Technologies Ltd, Century Enka Ltd, Kirloskar Pneumatic Company Ltd, Finolex Cables Ltd, and Jupiter Wagons Ltd. Recommendations from experts suggest a preference for largecap stocks over midcap and smallcap counterparts for a more resilient investment strategy.

Recent analysis by CLSA identified several liquid stocks that could benefit from the current government’s policies, including names like Reliance Industries, NTPC Ltd, Larsen & Toubro Ltd, NHPC Ltd, and Power Finance Corporation Ltd. The list also featured companies such as Bharti Airtel Ltd, Mahanagar Gas, Indus Towers, Ashok Leyland, and UltraTech Cement.