Indian Defence Stocks ‘Stupidly Valued’; Worst Time To Enter Markets, Says Ajay Srivastava

Ajay Srivastava, managing director of Dimension Corporate Finance Services Ltd., believes this is the worst time to enter the market and begin building a portfolio. "The overall situation is tough as of now," he said.

"As the domestic situation isn’t that great due to advance tax outflows, and the global environment is equally challenging, it is better to wait it out," Srivastava told NDTV Profit. "Both merit and data suggest 'hold off your investment' rather than rush in and invest everything. The April to June quarter has historically been the weakest."

Srivastava highlighted that apart from gold and silver, another attractive asset is power transmission REITs—which can offer a very handsome yield.

Investors should enter Indian defence stocks only when valuations are right, according to him. "Most Indian defence companies are PSUs. Investors may consider one or two that could be outliers and perform well, given current dynamics. But valuations and delivery expectations are currently very inflated—frankly, they’re ‘stupidly’ valued. If you want to invest in defence, the US defence sector might be a better bet. The ETF for defence and aerospace in the US is up 30% year-to-date," he said.

"Portfolio performance over three years depends heavily on the point of entry," he added. "Short strategies, which were widely used a decade ago, have lost effectiveness in recent years. Nobody shorts the market anymore. Those massive short plays we saw earlier just don’t happen now."

People are impatient when it comes to immediate results from their portfolios. They are significantly undervaluing the importance of timing and strategy, he noted.

"The fact remains—what matters is not just holding on to your investments, but when you’re buying. Are you entering the market in conditions like these? Or are you sitting on the sidelines and booking profits when you see exuberance?" he said.

He warned that the clouds are not only global but domestic too. "Advance tax growth is just 4%. It’s not just a global issue—the India cloud is also looming. Liquidity in the country is enormous, and as interest rates decline, people continue to pump more and more money into the equity market."

"Time will tell, but I still believe that your returns are largely defined by your entry point," he said.