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New Delhi: The defence stocks were reeling under pressure in the month of July. The NIFTY Defence Index went down as low as 11 percent in the last one month. However, the latest announcement on Tuesday, August 5, by the Defence Acquisition Council to procure defence goods worth Rs 67000 crore comes as a relief and is likely to revive the confidence in defence stocks.
The approval was given for major important purchases and upgrades that are set to strengthen the Indian Army, Navy, and Air Force operating capabilities. The proposal includes purchases of Compact Autonomous Surface Craft, Thermal Imager-based Driver Night Sight, BRAHMOS Fire Control System, BARAK-1 Missile System Upgradation, MALE Drones, and maintenance of the S-400 Air Defence System.
The overall purchase includes a thermal imager-based driver night sight that is used in infantry fighting vehicles such as BMP-1/2/2K and T-72 tanks. Bharat Electronics Ltd (BEL) could directly benefit from this idea, as the company is already a supplier of this system. BEL is also expected to get a benefit from the upgradation of the BARAK-1 missile defence system.
Additionally, the council also approved the upgrade of the SAKSHAM and SPYDER weapon systems, likely benefiting the defense PSU. Lastly, contracts will be finalised and signed for the maintenance of the S-400 missile defense system, and it is set to benefit the Navratna company. The BEL shares tanked nearly 9 percent in the last month. The shares were trading at Rs 390.60 apiece on the Bombay Stock Exchange (BSE) at the time of writing this article.
Sagar Defence is likely to benefit from the purchase of Compact Autonomous Surface Craft. The approval of the Brahmos Fire Control System and launcher could benefit Larsen and Toubro (L&T) and Godrej Airspace. Bharat Dynamics could benefit from the order passed for the upgrade of the BARAK 1 missile defence system.
For strengthening the Indian Air Force's capabilities, the Defence Acquisition Council approved the order for the purchase of mountain radar. In this context, BEL and Astra Microwave may benefit from the above purchase. Adani Defence, Tata Advanced Systems, BEL, Hindustan Aeronautics (HAL), and L&T can benefit from the purchase of Medium Altitude Long Endurance (MALE) drones. HAL is an important partner of DRDO's MALE program here.
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