Why defense stocks are a good diversification buy for your portfolio | Motilal Oswal
Why defense stocks are a good diversification buy for your portfolio | Motilal Oswal

Why defense stocks are a good diversification buy for your portfolio

Diversifying your portfolio is an important rule to be followed when it comes to investing smartly in the markets. One sure way of diversifying your portfolio is by investing in defence stocks. By investing in defence stocks in India, you are preparing your portfolio, even if marginally, for the prospects of a war-time situation or even an escalation in a crisis.

Stocks of these companies often perform well as defending a country is a national priority and the government is committed to the task at all times. Numerous defence projects are often run at the behest of the government and the result of such projects is that a select few companies, which can boast of technical competence, enjoy high revenues and a healthy profit margin.

To help the Indian initiative of attaining self-sufficiency, Prime minister Narendra Modi kicked off the Atma-Nirbhara Bharat campaign. His initiative was supported by Defense Minister Rajnath Singh who in August 2020 announced that India has put an embargo on imports of 101 weapons and equipment which will help power Indian arsenal production to new heights. This embargo will be implemented progressively between 2020 and 2024.

Here is a list of defence stocks that investors should start monitoring. 

1. Ashok Leyland

The company is the largest supplier of logistics vehicles to the government. The armed forces have 70,000 vehicles on the Stallion platform which currently play a key role in ferrying goods and soldiers to and fro during war-like situations.

2. Astra Microwave

This company is involved in the manufacturing of microwave-based super components and radio frequency instruments.

3. Bharat Electronics Limited

BEL recently launched a facility for manufacturing, testing and integration of an anti-torpedo defence system. The defence mechanism was devised by the DRDO.

4. Larsen & Toubro

L&T has licenses for the design, development and construction of warships, submarines, radars, high-speed boats and other arms and armaments.

5. BEML

This company is involved in supplying defence ground support and equipment to the armed forces. This company has maintained a healthy rate of dividend payout at 39.98% but has had a poor growth rate of 2.98% in the previous 5 years. Retail investors would do well to stay invested in the company for the long run. 

Final word:

By investing in defence stocks, investors are contributing, even if in an indirect fashion, to strengthening the security of the country. Retail investors can start investing in defence stocks by opening an online broking account with Motilal Oswal. Along with a broking account, an online trading account opening will also take place which will give investors a hassle-free and seamless trading experience.

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

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