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India's Third Giant Leap

This Leap Could Potentially Generate Gains
Far Bigger than Anything We Have Seen in Our Lifetimes

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How to Invest in Defence Stocks

How to Invest in Defence Stocks

Defence stocks are strong candidates for long-term wealth creation.

The government's push for self-reliance in defence will be a massive tailwind for these stocks. Many defence companies will likely pop up over the next few years. These businesses will cater to new ideas that the market is probably not even aware of.

The biggest catalyst of Make in India initiative for the defence sector was the government scrapping some major defence procurements from abroad. The scrapped orders include big ticket purchases of helicopters, all-terrain vehicles (ATVs) and short-range missiles, among others.

The long-term prospects of this sector are bright. But picking the right stocks will be a challenge.

This is because India's defence capabilities go beyond what is visible on the stock market indices. There are unlisted firms and niche hi-tech startups paving their way to become global defence suppliers.

As an investor, it's vital to understand the entire defence ecosystem in India if you want to pick the best stocks in this space.

Also, if the past has taught us anything, it's that you must have a long-term view and not get caught up in short term trends.

So how can you find the best defence stocks?

Here's a checklist...

A healthy, multi-year order book
High profile defence contracts (aircrafts, tanks missiles, submarines, drones)
Strong financials (low debt to equity ratio, strong cash flows, high ROE)
Solid backing by the promoters (in case of a private sector firm)
A track record of profitability

And last but not least, check the stock's valuations. Check both the price to book ratio and the price to earnings ratio. They shouldn't be too high.

You can get started with Equitymaster's screener for defence stocks. Also check out the list of defence stocks in the market.

Stocks in the defence space can offer good investment returns if you pick them carefully.

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India's Third Giant Leap

This Leap Could Potentially Generate Gains Far Bigger than Anything We Have Seen in Our Lifetimes

How to Invest in Defence Stocks

Here's a Big Idea for 2023 - Space StocksJan 25, 2023Why companies like Agnikul Cosmos, Skyroot Aerospace, Digantara, Dhruva Space and Pixxel are worth keeping a close watch on...

Check this Before Buying Green Hydrogen StocksJan 5, 2023Three critical factors can decide if the green hydrogen stocks make money.

Where to Find a Multibagger Defence StockJan 3, 2023When I wrote about private sector companies making a big shift to defence, few believed it to be true.

Your Next Defence Multibagger May Not be a PSUDec 28, 2022When I wrote about private sector companies making a big shift to defence, few believed it to be true.

Top Indian Drone Companies to Watch Out for in 2023Nov 30, 2022The drone industry is expected to significantly boost India's manufacturing potential to about Rs 1.9 tn by 2030.

Checklist for Defence Stocks with 3x UpsideOct 26, 2022What if I were to tell you that one of the most laid-back sectors is now on steroids?

5 Mutual Funds with High Exposure to Defence StocksSep 14, 2022Amid escalating geopolitical tensions, mutual funds are strategically investing in defence stocks.

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The Must Have Stocks in India's 75th Year of IndependenceAug 16, 2022Can India afford to be at the mercy of US and Russia to defend itself from hostile neighbours?