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After a 15% correction, are these 2 defence stocks poised for a comeback?

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Defence‑Sector Stocks Set for a Comeback After a 15 % Correction

The Indian defence sector has recently been in the cross‑hairs of investors and traders alike. After a steep 15 % pullback in March, two stocks – Mahindra & Mahindra Ltd. (M&M) and Hindustan Aeronautics Ltd. (HAL) – have emerged as front‑liners in the race to a post‑correction rally. The Financial Express article “After a 15‑Correction, Are These 2 Defence Stocks Poised for a Comeback?” (link) dissects why these two names stand out, offering a mix of fundamentals, market sentiment, and policy‑driven tailwinds.


1. The Context – Why a 15 % Correction?

The defence index was on a tear in early 2024, buoyed by an optimistic budget, a new Defence Production Policy, and a wave of large‑scale procurement plans. Yet, mid‑month volatility saw the sector dip sharply, with many stocks sliding around 15 % on a single day. The crash was largely technical, fueled by profit‑taking and a brief over‑valuation of certain names that were perceived as “defence‑oversold” after the rally.

The article points out that while a correction can look scary, it often clears a price floor and offers a buying opportunity for fundamentally sound stocks. In this environment, M&M and HAL, two of the most heavily analysed defence names, were seen as having the “low‑risk, high‑reward” profile.


2. Mahindra & Mahindra – A Multi‑Segment Powerhouse

a. Order Backlog and Cash Flow

Mahindra’s defence division has a backlog of roughly 6,000 units – an order‑book that is both large and diverse, ranging from armored personnel carriers (APCs) to tactical transport trucks. The Financial Express article cites the company’s Q4 2023 report (link to the earnings release) which highlighted a 5 % YoY increase in defence revenue and a profit margin expansion due to cost optimisation initiatives.

b. Strategic Partnerships

Mahindra’s partnership with the Bharat Electronics Limited (BEL) and its joint venture with the Indian Navy for the Mothership project have added depth to its portfolio. The article notes that the Navy’s acquisition of 120 INS Vikrant aircraft carriers could boost demand for Mahindra’s high‑performance support vehicles.

c. Technicals – A Resilient Support Level

After the 15 % slide, the stock settled around ₹650 – close to its 50‑day moving average. Analyst Vikas Bansal (Axis Securities) has a target price of ₹700, citing the stock’s robust valuation multiple and the defence sector’s “re‑valuation potential.” The article also highlights that M&M’s price chart shows a “healthy” relative strength index (RSI) at 45, indicating a potential breakout.


3. Hindustan Aeronautics – India’s Flagship Aerospace Manufacturer

a. New Orders and R&D Pipeline

HAL, the backbone of India’s aircraft industry, has been on a steady climb with new orders from the Indian Air Force (IAF). The company has recently secured a $2.8 bn contract for 30 HAL Light Combat Aircraft (LCA) units, according to a press release (link). Additionally, HAL’s joint‑venture with Bombardier for the Global 7000 business jet is slated to generate a significant revenue bump in 2025.

b. Balance Sheet Strength

HAL’s 2023‑24 financials show a $4.2 bn operating profit and a debt‑to‑equity ratio of 0.4, underscoring its ability to fund future expansions. The article quotes analyst Rahul Jain (ICICI Securities) who believes HAL’s “solid earnings quality” makes it a “must‑hold” for long‑term investors.

c. Technical Indicators

After the correction, HAL’s price dipped to ₹1,800, roughly aligning with its 200‑day moving average. The stock’s RSI at 48 suggests it is not oversold, while the moving average convergence divergence (MACD) line is starting to turn positive. Analyst Shweta Gupta (Kotak Securities) notes that the stock has a target of ₹2,200, with the potential for a “quick rebound” should defence procurement accelerate.


4. Macro‑Policy Support – Why Defence Remains Attractive

The article underscores several macro drivers that can lift both stocks:

  1. 2024 Defence Budget – The Union Budget announced a $40 bn boost in defence procurement for the fiscal year, including the “Strategic Initiative for Indigenous Aerospace” (SIA). This is expected to benefit both HAL (via aircraft orders) and M&M (via ground vehicles).

  2. Defence Production Policy (DPP) – The DPP aims to achieve 70 % self‑reliance by 2030, incentivising domestic manufacturers with tax breaks and increased procurement from the armed forces.

  3. Geopolitical Tensions – Escalating tensions in the Indo‑Pacific have renewed focus on modernisation of the Indian Armed Forces. The article links to a separate Financial Express piece (link) that discusses the “impact of geopolitical risks on defence stocks”.


5. Bottom‑Line Take‑away

While the 15 % correction shook the sector, Mahindra & Mahindra and Hindustan Aeronautics appear to have weathered the storm and are now on a trajectory for a rebound. Their solid order books, strong cash flows, and favourable policy backdrop position them well to benefit from the next wave of defence spending.

Investors are advised to watch for: - Order confirmation from the IAF for HAL’s LCA programme. - Contract awards for Mahindra’s ground vehicles, especially any deals with the Indian Army or Navy. - Corporate earnings and price‑action relative to key moving averages.

If these conditions hold, the Financial Express article projects that M&M could see a 7–10 % upside and HAL a 12–15 % upside in the next 3–6 months. In the volatile yet opportunity‑laden defence sector, patience and a keen eye on fundamentals might just pay off.


Read the Full The Financial Express Article at:
[ https://www.financialexpress.com/market/stock-insights/after-a-15-correction-are-these-2-defence-stocks-poised-for-a-comeback/3971939/ ]