Shares of Astra Microwave Products shot up 19.99 per cent to Rs 111.65 on the BSE, while those of Walchandnagar Industries surged 9.97 per cent to Rs 100.90.
Similarly, shares of BEML appreciated 6.98 per cent to Rs 653.35; Pipavav Defense And Offshore Engineering gained 4.97 per cent to Rs 67.60, and Bharat Electronics Ltd rose by 2.35 per cent to Rs 1,611.45.
"The Commerce and Industry ministry has circulated a Cabinet note (on the issue) for inter-ministerial consultation," sources said yesterday.
The proposal to raise FDI cap in defence from 26 per cent to 100 per cent is aimed at giving a boost to manufacturing activities.
As per the 15-page Cabinet note, which was circulated yesterday, portfolio investors, including FIIs, would be permitted to invest only up to 49 per cent.
Further, the note said that a foreign company can even take over a domestic entity provided it brings in state-of-the art technology.
This is the first major initiative of the ministry after new Commerce and Industry minister Nirmala Sitharaman took charge this week.
Sources said that permitting FDI in the sector "will hugely help in reducing import bill for defence equipment, will help in boosting manufacturing and creating jobs".