Shares of the companies engaged in defence sector surged up to 10 per cent on the BSE on Monday in the early morning deal after the government hiked foreign direct investment (FDI) via automatic route from 49 per cent to 74 per cent.
Hindustan Aeronautics, BEML, Bharat Dynamics and Bharat Electronics were among the state-owned companies that rallied up to 10 per cent on the BSE. On the other hand, Bharat Forge, Astra Microwave Products and Walchandnagar Industries from the private sector were up in the range of 3 per cent to 5 per cent, as compared to a 1.1 per cent decline in the S&P BSE Sensex at 09:34 am. The increase in the FDI limit in defence sector is a big long-term positive for these companies.
Finance Minister Nirmala Sithraman on Saturday announced that the FDI limit in defence production was being raised to 74 per cent from 49 per cent for FDI through the automatic route as part of reforms in the defence sector to boost the government's Make in India campaign, while some weapons and platforms will be banned for imports. Items banned for imports can only be purchased from within the country.