Defence sector shares surged as high as 10 per cent on BSE in otherwise weak trade on Monday after Finance Minister Nirmala Sitharaman in her fourth tranche of measures of nearly Rs 21 lakh crore announced to hike Foreign Direct Investment (FDI) limit in defence sector under the automatic route from 49 per cent to 74 per cent. Hindustan Aeronautics share prices climbed 10 per cent to Rs 576 apiece, similarly, Sika Interplant Systems shares too jumped 10 per cent to Rs 181.50 per equity. “We shall notify a list of weapons and platforms which will not be allowed or imported. Every year this list will be increased, as we build capacities,” FM Sitharaman said on Saturday.
Following a surge in the share prices of companies engaged in the defence sector, BEML shares gained 5.3 per cent, Bharat Dynamic was up 4.71 per cent, Bharat Electronics share price jumped 5.5 per cent and Bharat Forge 4 per cent. While shares of Astra Microwave Products gained near 5 per cent and Apollo Micro Systems share price climbed 7.5 per cent. “Measures on defence and space will lead to an uptick in stock prices of some companies for a few days but here again, one will have to watch as to how fast intent is converted into execution,” Dhiraj Relli, MD & CEO, HDFC Securities, said.
FM Sitharaman announced that certain items banned for imports can only be purchased from within the country. In order to reduce the huge defence import bill, there will be indigenisation of some imported spares. Besides, there will be a separate budget provisioning for domestic capital procurement.”FDI in defence increased but imports to be curbed. Companies manufacturing these products will benefit in both ways – get FDI and also have demand. Self-reliance will increase,” CARE Ratings said.
The government also announced that a time-bound defence procurement process such as setting up of Project Management Unit (PMU), a realistic setting of general staff qualitative requirements of weapons and platforms, and overhauling trail and testing procedures will be done.