Defence stocks close mixed after smart early trade rally

Shares of companies related to the defence sector closed on a mixed note on Monday in-line with a weak broader market after zooming up to 10 per cent in early trade.

In the early trade, these shares gained after the government said it will relax foreign direct investment norms in defence manufacturing by allowing 74 per cent FDI under the automatic route. However, as the trade progressed, some of these stocks surrendered their early gains and went into negative territory.

Shares of Hindustan Aeronautics closed 4.32 per cent higher and Astra Microwave Products surged 4.94 per cent on the BSE.

However, Bharat Electronics fell 4.87 per cent at close of trade, Bharat Dynamics too dipped 2.63 per cent and BEML declined 1.50 per cent.

The government on Saturday said it will relax foreign direct investment norms in defence manufacturing by allowing 74 per cent FDI under the automatic route with a view to attracting overseas players in the sector.

As per the current FDI policy, 100 per cent overseas investments are permitted in the defence industry -- 49 per cent under the automatic route, while beyond that government approval is required.

Finance Minister Nirmala Sitharaman said the FDI limit for the sector under automatic route will be raised from 49 per cent to 74 per cent.

"It will have security clearance and everything else as always," she said while announcing the fourth tranche of the Rs 20 lakh crore stimulus package for the coronavirus-hit economy.

Meanwhile, the BSE 30-share index closed the day 1,068.75 points or 3.44 per cent lower at 30,028.98.