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There may be strong movement in the shares of defense sector companies in the Indian stock market on Monday. During the weekend, new and important government contracts have been handed over to domestic defense equipment manufacturing companies by the Ministry of Defense and the Indian Army. After these new orders issued to promote indigenous defense production under 'Self-reliant India' and Make in India Initiative, there is every possibility of breathing new life into defense stocks. As soon as the market opens, shares of companies like Hindustan Aeronautics (HAL), Bharat Electronics (BEL), Mazagon Dock, Bharat Dynamics (BDL), Zen Technologies and Solar Industries may see a sharp rise in trading volumes and prices.

The order book of defense sector companies is considered to be the most important indicator for valuation and stock performance. The new contracts awarded by the Defense Ministry include modernization of advanced weapon systems, surveillance radars, drones and anti-drone systems, loitering munitions and military simulators. This order directly strengthens the medium and long-term revenue visibility of domestic companies. Analysts believe that this new work-order will act as a big catalyst for defense stocks, which have been undergoing consolidation for the last few weeks, giving new impetus to the companies' earnings growth and margin expansion.

The positive impact of the Central Government's policy of reserving more than 75 percent of the defense capital acquisition budget for domestic companies is now directly visible on the financial figures of listed defense companies. In the new tenders being issued for the modernization of defense forces, 'By Indian-IDDM' (Indigenously Designed, Developed and Manufactured) category is being given priority. Major public sector defense undertakings (Defence PSUs) as well as private sector specialist technology companies are getting its direct benefit. Due to reduced dependence on foreign defense imports, domestic companies are not only getting big contracts but are also getting unprecedented support in Research and Development (R&D).

The defense stocks that are expected to see the fastest activity on the first trading day of the week mainly include the following stocks:

• Hindustan Aeronautics Limited (HAL): The stock continues to be the most favorite largecap defense stock in the stock market due to new contracts and engine deals to fighter jets, helicopters and avionics upgrades.

• Bharat Electronics Limited (BEL): Its order book has reached record levels after receiving large orders for state-of-the-art radar, electronic warfare systems and missile tracking equipment.

• Mazagon Dock and Cochin Shipyard: A tremendous boom is expected in the shipbuilding sector due to new contracts for construction and repair of naval ships, submarines and warships.

• Bharat Dynamics (BDL) and Solar Industries: New government projects in the field of missile production, rocket systems and defense explosives are likely to trigger a volume breakout in the stock.

• Zen Technologies and Paras Defence: The increasing dominance of private companies in defense simulators, optical payloads, anti-drone technology and space applications will keep the midcap and smallcap segments active.

The Indian defense industry is no longer limited to domestic supplies only, but is also rapidly expanding its presence in the global market. The Government of India has set an ambitious target of defense exports worth $15 billion by the year 2026. The international order book of the companies is also strengthening due to increasing demand for Indian missile systems, artillery guns and radars from the Middle East, South East Asia and African countries. Indian defense manufacturers are benefiting from the increasing global spending on security and defense preparedness amidst the ongoing geopolitical tensions globally, due to which foreign institutional investors (FIIs) and domestic mutual funds are continuously buying these stocks.

Market technical analysts say most of the defense stocks have formed strong support bases near their 50-day and 100-day moving averages. Based on the positive contract news that came out over the weekend, gap-up opening may be seen in these stocks in the early session of Monday. However, market experts have advised retail investors to avoid creating aggressive leverage positions without stop-losses at extremely high levels. For investors with a long-term outlook, buying on dips in defense PSU stocks with strong fundamentals and stable dividend yields can prove to be an effective strategy.