Defence stocks may become attractive for investment

Market pressure is easing thanks to actions from the Reserve Bank of India (RBI). Dhananjay Sinha, Co Head of Equities at Systematix Group, highlights that measures such as Open Market Operations (OMO) and cash reserve ratio (CRR) cuts have improved market sentiment, particularly in the financial sector. He notes that after a significant decline in stock valuations, there is a growing sense of recovery. Although this positive sentiment is encouraging, Sinha believes that a full turnaround in earnings may take a few more months. The global landscape also shows signs of easing, with decreased concerns over U.S. tariffs and a drop in U.S. bond yields contributing to a more favorable market atmosphere. Sinha points out that the RBI has injected substantial liquidity—around 6.9 lakh crores—over recent months. This liquidity, combined with regulatory relaxations, especially for non-banking financial companies (NBFCs), is helping to stabilize the market. The financial sector, in particular, is responding well to these changes. However, public sector banks are less active in this phase. As for investing in defense and railway stocks, Sinha advises caution. He believes government spending on infrastructure will be limited because of the fiscal situation and lower tax collection. While defense spending is expected to remain steady due to ongoing global tensions, railway investments may have peaked following high expenditures in recent years. Overall, while some defense stocks may offer rebound opportunities after recent declines, investors should remain selective and cautious. They should keep an eye on the broader economic indicators before making decisions.