What if you invested Rs 1 lakh in these defence stocks three years ago?

Defence stocks are the shares of companies involved in the defence industry. These companies primarily focus on manufacturing and supplying products and services related to national defence and security. Defence stocks in India have gained significant attention following Russia’s attack on Ukraine. The invasion has prompted several nations, including India, to increase their defence budgets. This surge in defence spending has led to the outperformance of defence stocks in these countries. 

India currently holds the fourth position among the world’s top defence spenders. It can be inferred that countries worldwide are prioritising defence as evidenced by their increased focus on military expenditures. The geopolitical conflicts between India and its neighbouring countries have been increasing in the last few years and India is continuously expanding its defence budget and this move will help India to keep updating their military system with new technology.

The government aims to enhance its defence manufacturing industry and foster self-reliance through these initiatives to effectively address threats posed by its competitors. The country’s decision is a response to escalating national security concerns, compelling India to prioritize the development of its own defence capabilities.

Furthermore, the “Make in India” initiative has provided a significant boost to domestic companies, encouraging them to invest in capital expenditures and expand their production capacities. This has resulted in favourable business conditions and, ultimately, improved profitability for these companies. This also boosts the export of defence equipment across the globe from India.

India’s defence exports have achieved an unprecedented milestone, surging to Rs 15,920 crore from Rs 12,814 crore in FY23, a remarkable ten-times increase since FY17. India’s defence products are now being exported to over 85 countries, underscoring the nation’s growing global reach in the defence sector.

 Let’s examine the defence stocks in India and their returns during the last three years. Additionally, we will calculate the total value that would have been generated if someone had invested Rs 1 lakh in each of these stocks and held them until today.

During the past three years, there has been a remarkable rally in defence stocks, with returns ranging from 130% to 875%. Even when the broader market indices struggled to generate substantial returns during downturns, these stocks outperformed, surpassing the returns of the indices. Notably, an investment of Rs 1 lakh in Zen Technologies alone would have yielded a return of over 800% in just three years. Similarly, investing in any of the aforementioned companies would have resulted in returns exceeding 100% within the same timeframe. 

The defence sector is buzzing at the moment, keep it on your watch list.