Defence-related stocks such as Reliance Defence, Bharat Electronics, BELM and Walchandnagar Industries rallied on Monday after the centre allowed Foreign Direct Investment in defence sector of upto 100 per cent.
Reliance Defence and Walchandnagar Industries closed 7.39 per cent and 5.56 per cent up at Rs 66.10 and Rs Rs 153.85, respectively.
Other defence-related companies BEML and Bharat Electronics gained 3.96 per cent and 2.02 per cent to Rs 868.65 and Rs 1,285.15, respectively.
Bharati Defence and Infrastructure soared 10.44 per cent to Rs 27.50. On the other hand, BSE Sensex jumped 241.01 points, or 0.91 per cent, to 26,866.92.
Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG said, “This decision will now bring in real investments provided the defence ministry also speeds up the procurement process and issues big ticket orders. We may see its positive impact over the next 6-12 months.”
Foreign investment beyond 49 per cent has now been permitted through government approval route, in cases resulting in access to modern technology in the country or for other reasons to be recorded. The condition of access to ‘state-of-art’ technology in the country has been done away with.
FDI limit for defence sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.
For private security agencies, FDI up to 49 per cent permitted under automatic route and FDI beyond 49 per cent and up to 74 per cent will be permitted with Government approval route.