Mixed Market Response to Lack of Defence Sector Announcements in Interim Budget

Mixed Market Response to Lack of Defence Sector Announcements in Interim Budget

VoM News Desk | February 1, 2024 | 02:55 PM IST | Breaking News | Follow on Google News

Mixed Market Response to Lack of Defence Sector Announcements in Interim Budget/Bloomberg

Mixed Market Response to Lack of Defence Sector Announcements in Interim Budget

Finance Minister Nirmala Sitharaman’s Interim Budget speech for 2024-25 did not feature substantial announcements related to the defence sector, leading to a varied response in the stock market on February 1. Major defence stocks, including Hindustan Aeronautics Ltd (HAL) and Bharat Electronics Ltd (BEL), experienced a decline of over 1.74 percent and 1.80 percent, respectively, during intraday trade. Other defence-related stocks, such as Data Patterns, Bharat Dynamics, Kaynes Technology, Mazagon Dock Shipbuilders, Mishra Dhatu Nigam, and MTAR Technologies, also saw declines ranging from 0.5% to 3.5% in Thursday’s trading session.

Budget Allocation Highlights and Stock Market Reactions
Although the Interim Budget allocated the lion’s share to the defence sector, with ₹6.2 lakh crore—an increase of 13 percent compared to the previous year—the market exhibited a subdued response. Specifically, stocks in the defence sector witnessed declines despite a 6 percent increase in the allocation for “modernization and infrastructure development,” reaching ₹1.62 lakh crore. The fiscal year 2024 defence expenditure, however, remained considerably lower than the FY24 budget, which had experienced a 13.8% increase to ₹5.94 lakh crore.

New Scheme for Advanced Technologies and ‘Atmanirbharta’ Initiative
During her Interim Budget speech, Minister Sitharaman announced plans to launch a new scheme focused on enhancing advanced technologies for defence purposes and accelerating the ‘Atmanirbharta’ (self-reliance) initiative. While the defence sector had anticipated a 5–8 percent growth compared to the previous budget, the market response indicated a more cautious outlook, reflecting the sector’s expectation of increased allocations for Research and Development (R&D), Unmanned Aerial Vehicles (UAVs)/drones, anti-drone systems, and related sectors.

Defence Sector’s Year-on-Year Outlook
Analysts anticipate a year-on-year increase of 12–15 percent in the defence sector’s capital outlay, driven by ongoing modernization efforts and a heightened focus on indigenous production and export-oriented initiatives. The market’s mixed reaction suggests a nuanced response to budgetary priorities and underscores the importance of comprehensive sectoral strategies in navigating market dynamics.

VoM News Desk

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