Defence sector has a long term growth path, backed by rising government spending and initiatives. While, the sector has recently seen a correction due to the following factors:
1) Profit booking, after a rally in 2023 and early 2024
2) Temporary delays in order execution, and budget disbursement in FY25
3) Broader market volatility
Sector's fundamentals remain intact. Key highlights that have been dwelling up in this sector are as follows:
1) The Union Budget 2025-26 has allocated 6.81 lakh crore to Ministry of Defence
2) Capital Outlay of 1.8 lakh crore will drive defence modernization, new acquisition and advance technology
3) Government has strong pipeline of defence procurement, which may provide steady revenue visibility
4) Rising focus on Domestic Defence Manufacturing
*Conclusion*: The recent correction in the defence sector may represent short-term fluctuation in an otherwise strong, long-term growth story.
