GRSE, MDL, Cochin Shipyard Gain Up To 7% On Hopes Of DAC's Nod For New Naval Warships

Shares of shipbuilding companies, such as Mazagon Dock Shipbuilders (MDL), Garden Reach Shipbuilders & Engineers (GRSE) and Cochin Shipyard, have surged up to 7 per cent in intra-day trades today.

The rally in these stocks came after reports stated that the Defence Ministry’s Defence Acquisition Council (DAC) would likely meet today (September 3, 2024) to discuss proposals of mega projects worth around Rs 1.2 trillion for approval.

Among the individual stocks, MDL surged 7 per cent to Rs 4,489.05, followed by GRSE (up 6 per cent at Rs 1,948.55) and Cochin Shipyard (4 per cent higher at Rs 1,930). In comparison, the BSE Sensex was down 0.13 per cent at 82,452 at 10:33 AM.

However, currently, these stocks are quoting 23 per cent to 35 per cent below their respective record high levels they touched in July.

Thus far in the calendar year 2024, the market price of these companies has zoomed up to 181 per cent. In comparison, the BSE Sensex was up 14 per cent.

This anticipated approval is generating optimism in shares of defence-related companies, as it signals increased government spending and further strategic investment, which are likely to benefit major players in the shipbuilding sector.

The increase in shipping stocks reflects a broader surge in interest for defence stocks, fueled by Hindustan Aeronautics (HAL) securing a Rs 26,000 crore order.

It is worth mentioning that in the coming three months the capability of Indian armed forces, particularly the Indian Navy will get a big boost as the deal indigenous construction of three additional Kalvari class submarines will be approved by the end of the year.

Even though the Indian Navy was expected to be a 200 warship force by 2027 as per long-term prospective plans, there is a time lag on the count of resources and procedures.

Given the deteriorating strategic environment in the Indo-Pacific, the Indian Navy is likely to approach DAC soon to build 10-12000-ton destroyers of advanced Project 15 class equipped with anti-ballistic missile systems and drone launch capability.