Bharat Electronics Ltd fell as much as 5.5 percent, HAL by up to 6.7 percent, and BHEL by 7 percent on Monday as the Indian defense industry was down after the Union Budget for FY26. The government announced the defense budget for the next year at Rs 4.92 lakh crore, which was a disappointment to the market as perceived and led to the selling off of major public and private players in the defense sector.
On the BSE, BEL plunged to 6.5 % to Rs 263.4, HAL declined to 6.9 % to Rs 3516.45, and BHEL to 5.1 % to Rs 189.65. Besides stocks in the PSU defense sector, other stocks in this sector came under their bearings as well. Bharat Dynamics’ stock fell 10.2 percent to Rs 1128.45, and the other private players, such as Paras Defense and Space Technologies, Data Patterns, and MTAR Technologies, also witnessed a drop in their stocks.
Paras Defense gave a negative return of 7.1%, closing at Rs 981, Data Patterns lost 3% to end at Rs 2046, and MTAR Technologies declined by 3.1% to be priced at 1557.05 on BSE.
Opinion makers had anticipated a much higher rise in the defense allocation; some expected it could go up from last year’s Rs 6.22 lakh crore. Even the marginal increase in the overall capital expenditure from Rs 11.11 lakh crore in the previous year to Rs 11.2 lakh crore in the current year was looked down upon because of a lack of interest in infrastructure and political pressure.
Over the months, the optimism over the arms and infrastructure expenditure diminished, and across the defense companies, investors started selling.
The following are the issues regarding the government. It was mainly concentrated on infrastructure, and capital expenditure is likely to be impacted as per the political considerations and freebie politics.
With this modest increase, the railways, defense, infrastructure, and engineering seem to be on the receiving end. “FMCG, auto, and consumer durables may continue to remain in focus in the coming days,” feels Apurva Sheth, Head of Market Perspective & Research, SAMCO Securities.
Key Highlights From The Budget
- Capital Expenditure Allocation: The budget’s capital outlay remains largely unchanged, raising concerns about the government’s commitment to enhancing railway infrastructure.
- Safety Initiatives: A significant portion of the budget is earmarked for safety systems, including the Kavach technology aimed at preventing train accidents. Approximately ₹1.08 lakh crore has been allocated for safety-related projects.
- Focus on Coach Manufacturing: The budget prioritizes coach manufacturing, but investors were looking for more comprehensive investment strategies that would drive long-term growth.