Defence stocks down up to 6% after FDI hike

Shares of defence equipment makers settled the day with up to 6 per cent losses on profit booking today after Finance Minister Arun Jaitley proposed to raise foreign direct investment in the sector to 49 per cent.
Bharat Electronics shares were down 6.10 per cent, while BEML fell by 2.54 per cent on the BSE.
Shares of Astra Microwave Products declined 2.08 per cent, Dynamatic Technologies ended 0.90 per cent lower and Walchandnagar Industries lost 0.80 per cent.
Marketmen said that defence stocks slipped post the budget announcement largely on account of profit-booking.
"The increase in FDI limit for defence equipment manufacturing from 26 per cent to 49 per cent is definitely a step in the right direction. However, this will be viewed by most foreign OEMs and some Indian companies as a very limited step and for a real change, this limit should have been enhanced to 51 per cent," said Ganesh Raj, National Leader - Policy Advisory, Ernst & Young.

"The overall defence budget has been kept at the same level of 2.29 lakh crore as was announced in the interim budget in February. There has been a very marginal increase of 5,000 crore in the capital outlay," he added.

In order to boost manufacturing and reduce import dependence, the government today proposed to raise the foreign investment limit to 49 per cent in the defence sector.
While presenting the Budget 2014-15, Finance Minister Arun Jaitley said that India is the largest buyer of defence equipment in the world and the domestic manufacturing capacities are still at a nascent stage.

"Companies controlled by foreign governments and foreign private sector are supplying our defence requirements to us at a considerable outflow of foreign exchange.
"The composite cap of foreign exchange is being raised to 49 per cent with full Indian management and control through the FIPB route," he said.
At present, India permits 26 per cent FDI in the defence manufacturing.
As part of military modernisation drive, the government today allocated Rs 2.29 lakh crore for the Defence Ministry in the Budget, marking an increase of around 12.5 per cent from the last fiscal.
Selling was also seen in the broader market that saw a highly volatile trade, with the Sensex ending at 25,372.75, down 72.06 points.