Shares of all defense companies including those of Hindustan Aeronautics Ltd. and Cochin Shipyard Ltd. extended losses on Wednesday after Prime Minister Narendra Modi-led BJP failed to win majority support in the elections.
HAL, the state-owned aerospace and defense company was the worst performer amongst defense stocks after markets plummeted as the results raised questions about Modi’s future.
Although HAL fell as much as 8.59%, it recovered to trade 7.83% lower as of 10 a.m. Garden Reach, Cochin Shipyard and Bharat Dynamics fell over 10%. This compares to a 0.02% decline in the benchmark Nifty 50.
The Modi-led BJP failed to attain the 272 majority needed to form a government of its own. Now, it will have to work with its allies to form the government at the centre, leading multiple brokerages to turn cautious on Indian equities since the results will likely increase near-term volatility and risk perception, impacting market multiples in the near term.
The decline in the defence sector comes after HAL, Bharat Dynamics Ltd., and Bharat Electronics Ltd. hit all-time highs on Monday after exit polls predicted clean majority for the BJP.
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