Defence stocks rise on foreign capital inflow notification

New Delhi, Aug 27 (IANS) Stocks of defence equipment manufacturing companies rose on Wednesday, a day after the central government notified raising the foreign direct investment (FDI) limit in the sector to 49 percent.

At the Bombay Stock Exchange (BSE), shares of Bharat Electronics rose 20.00 percent to trade at Rs.2,114.40 rising from its previous day’s close of Rs.1,762.

Scrip of BEML increased 4.99 percent at Rs.540.55, moving up from Rs.514.85. Stocks of Astra Microwave Products reported a gain of 8.55 percent at Rs.135.90 from its previous close of Rs.125.20.

The stock movements come in the backdrop of the central government on Tuesday notifying its decision to hike foreign equity cap in the defence production industry from 26 percent to 49 percent.

According to a note issued by the department of industrial policy and promotion (DIPP), all types of equity — from foreign funds, companies and non-residents — will have to be within 49 percent.

The DIPP note further clarified that foreign investment proposal above 49 percent will have to get the nod from the Cabinet Committee on Security.

A favourable decision will depend upon whether such venture was likely to fetch the country access to modern and state-of-the-art technology, the notification added.

A meeting of the cabinet, presided over by Prime Minister Narendra Modi, had Aug 6 decided to hike the cap in the defence sector in a move that can help India curb its import bill on military hardware.

India sources 70-75 percent of such hardware from abroad and Finance Minister Arun Jaitley, in his budget speech, had said the government was committed to allowing higher foreign equity in the sector.