Skepticism on stock price vs tailwinds of policy push: 4 defence sector stocks with upside potential of up to 26%

Synopsis

In the last four years of bull run, among the PSU space, defence was the first sector to see a re-rating, infact it was the sector which led back the resurgence of the PSU space which was then followed by railways and then NBFCs which are lending to particular sectors. Now the fact that the defence stocks have run up sharply and sitting with gains, questions are bound to come on whether they have priced all the positives or not. A part of the answers lies in looking at how the stock behaved in recent times and whether the macro operating picture of the sector has changed or not. On the price front, in the corrective move of March, after initial correction due to profit booking, some of the defence stocks have once again moved upward and are quoting close to all time high, indicating demand for the paper from this sector. On the fundamental front, the operating matrix is better and probably it is one of the sectors where the continuation in policy making will have the biggest positive impact.

Whenever a sector gets re-rated, it goes through phases where there is skepticism about stock price moving ahead of time and questions being raised about what now. Should I do now ? Should I buy more or book profit?. Most of the time, decisions are taken without looking at whether the macro environment which saw a dramatic improvement continues to be favorable or not. Because if the operating environment is fine, growth is bound to come and it
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