'Lot Of Money In These Stocks': Nirmal Bang Bullish On PSUs After Nifty Defence Tanks 8% This Month

The Nifty India Defence index has emerged as the top sectoral laggard this month after tanking over 8% so far with further weakness eyed in the next few sessions. The index has gained 19% on a year-to-date basis against the NSE benchmark Nifty 50's gain of 3.6%. Amid the current volatility, D-Street analysts and brokerages have maintained a positive stance of the stocks and expect a gradual upside in the index in the coming quarters of FY26.

Major defence players have experiences a steep correction in their stock prices this month. Zen Technologies is down 22% so far, while Cochin Shipyard has dropped 13%. In the current scenario, Jyoti Gupta, Research Analyst at Nirmal Bang Institutional Equities Research told NDTV Profit in an exclusive interview that the sector's outlook is robust and defence PSU stocks will be a positive surprise for investors in the coming quarters.

According to Gupta, the entire defence ecosystem is riding on policy tailwinds and a record order pipeline in FY26. Nirmal Bang has long been bullish on the sector even during the downturns. "For defence players, the Q1 earnings were mixed, but the order book remain robust," said Gupta, explaining her positive outlook on the sector. The analyst expects a near-term upside based on both fundamentals and technical views.

"The valuations for most defence stocks remain elevated versus historical averages. However, the sector will start to surprise investors from Q3 or Q4," claims Gupta of Nirmal Bang. Bloomberg data shows key defence players such as Mazagon Dock Shipbuilders, Data Patterns, and Bharat Dynamics are trading at a current P/Es of 46x, 63x, and 106x respectively.

According to Gupta, investors should keep an eye out for defence PSU stocks in the near-term for 'positive surprises'. "BEL, Data Patterns, and Bharat Dynamics will likely give a positive surprise from Q3 or Q4," she said. According to the market expert, companies that haven't delivered in last five years will deliver in the next two years.

"Keep a hawkish eye for those names and you'll make a lot of money in those stocks," concluded Gupta, as an advice to stock market participants. The outlook for most defence players has been positive from Q1 results.

Bharat Electronics (BEL) remains on track for hitting its FY26 guidance and expects to stabilize revenue growth near 15-18% level. The Q1 earnings for Hindustan Aeronautics was broadly in line with the management guidance. A higher revenue and lower provisioning aided EBITDA growth

For Mazagon Dock, the EBITDA continued to be impacted by provisions of Rs 540 crore. 1HFY26 is expected to remain soft and recovery is expected from Q3FY26. Coming to Zen Technologies, the slowdown in order inflows persisted for the fifth quarter. The management is optimistic over inflows worth Rs 650 crore in Q2.