Defence, railway stocks surge after BJP’s state election victory; HAL, BEL, Ircon hit 52-week high

Amidst the massive victory of the Bharatiya Janata Party (BJP) in the state election on Sunday, December 3, defence and railway stocks rallied on Monday's trading session. With the BJP in power, the railway and defence sectors are expected to continue to receive significant growth attention, according to analysts.

Shares of Hindustan Aeronautics Ltd (touched 52-week high), Bharat Electronics Ltd (touched 52-week high), Bharat Dynamics Ltd, and Mazagon Dock Shipbuilders Ltd were all up 0.5% to 3%.

So far in 2023, investors have received a 100% return on their investment in Hindustan Aeronautics shares, a 58% increase in Bharat Electronics shares, and a 33% increase in Bharat Dynamics shares.

"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!

Railway stocks, Ircon International Ltd (which hit a 52-week high), Rail Vikas Nigam Ltd, Indian Railway Catering & Tourism Corporation Ltd (IRCTC), Ircon International Ltd, and BEML Ltd all saw a gain of 0.6% to 2% on Monday's session. 

To date in 2023, investors have received a 151% return from Rail Vikas Nigam, a 12% increase from IRCTC, and a whopping 203% surge from Ircon.

Also Read: Adani Enterprises share price, other group stocks surge up to 15% as Nifty 50 jumps to record high

According to Rajesh Bhosale - Equity Technical and Derivative Analyst, Angel One, this space has outperformed and has given stellar returns for the calendar year. The uptrend is likely to continue with strong bullish cycle for the space. Traders are hence advised to keep positive approach and in case of any broader market price correction, they can buy in this space.

The budget allocation for defence increased to ₹5.94 lakh crore for 2023–24 from ₹5.25 lakh crore for 2022–23, while Finance Minister Nirmala Sitharaman stated that the financial outlay for the railways was nine times greater than that allocated in 2013–2014, with an outlay of ₹2.40 lakh crore for the fiscal year 2023–24 compared to ₹1.40 lakh crore in the fiscal year 22–23.

Also Read: Stock market today: Adani Power, REC, ACC, Cyient, others lead midcap, smallcap indices at record high

Since the BJP has historically given priority to the railway and defence industries, analysts predict that if the party wins the upcoming 2024 election for a third time, enormous sums of money will be set aside for these sectors and would remain in high focus towards growth.

"Going ahead market is positive here, as it expects the government to focus on areas where maximum investment from Indian companies is possible, especially railways, defence, and capital goods,” said Avinash Gorakshakar, Head of Research at Profitmart Securities. 

The Nifty 50 hit a new record high of 20,602.50 and the Sensex hit a record high of 68587.82 on Monday. Similarly, the BSE Midcap and Smallcap indices reached record highs at 35,124.23 and 41,221.91, respectively.

Following the state election results, there were significant gains in the domestic market, which boosted trust in the political stability of the country.

Also Read: Coal India, ICICI Bank amongst key Nifty gainers as Banks, Financials, Metals, Oil & Gas index lead the market rally

"From the market perspective, the results were better-than-expected. The market has already partly discounted a BJP victory with a 500 point rally during the last 4 sessions. But the mood is so exuberant that the rally will continue. The global backdrop also is favourable with the US 10-year bond yield declining to 4.23%. An across the board rally in stocks is in the offing.

Also Read: PNB share price hits 52-week high. Experts see more upside

A restraining factor will be the valuations which are high and will get stretched further with the rally gaining momentum. In the near-term the market will ignore fundamentals and move up but soon high valuations will trigger some selling," said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.