If want to find the best defence stocks in India, you will need to dig deep into the defence sector.
The long-term prospects of this sector are bright and there are many good companies in this space.
But estimating future profits of these companies will be a challenge for investors.
Investors can consider defence stocks for investment but before taking a call to buy them, you must check their fundamentals.
First, as an investor, you should study and understand the defence ecosystem in India. This is vital if you want to find the best defence stocks.
This is because companies in the defence sector operate within the ecosystem. In other words, ecosystem connects them all. They cannot deliver a profit if one aspect of the ecosystem is not functioning properly.
Also pay close attention to the government’s policies. These will be vital for the growth of the sector.
Stick to companies with low debt, a strong track record, competent management, and a healthy order book. This combination is necessary in all good defence sector stocks.
Also, check for future opportunities once the current order book is executed. Finally, pay a reasonable price for the stock.
This way you won’t go wrong with your next defence stock purchase.
You can get started with Equitymaster’s screener for defence stocks. Also check out the list of defence stocks in the market.
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Based on marketcap, these are the top defence companies in India:
You can see the full list of defence stocks here.
And for a fundamental analysis of the above companies, check out Equitymaster’s Indian stock screener which has a separate screen for best defence stocks in India.
The best time to invest in the defence sector is when valuations of defence companies are attractive.
Where can I find a list of defence stocks?
The details of listed defence companies can be found on the NSE and BSE website. For a curated list you can check out our list of defence stocks.
Two commonly used financial ratios in the valuation of defence stocks are:
Price to Earnings Ratio (P/E) - One can also use Price to Earnings ratio (P/E) which compares a firm's market capitalization to its with its earnings per share. The higher the P/E ratio, the more overvalued the stock and vice versa.
To find stocks with favourable P/E ratios, check out our list of defence stocks with their P/E ratios.
Price to Book Value Ratio (P/BV) - One can also use Price to Book Value Ratio (P/BV) which compares a firm's market capitalization to its book value. The lower the ratio, the more undervalued the stock is and vice versa.
To find stocks with favourable P/BV ratios, check out our list of defence stocks with their P/BV ratios.
Within the Defence sector, the top gainers were KAYNES TECHNOLOGY (up 3.5%) and PREMIER EXPL. (up 3.2%). On the other hand, RELIANCE NAVAL & ENG. (down 4.6%) and KRISHNA DEFENCE (down 4.3%) were among the top losers.