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The Nifty 500 gained 39.1% in FY24, and 17% since our last analysis of top Nifty500 contributors in October 2023. Higher government spending on infrastructure and railways has made Indian Railways Finance Corp. (IRFC), REC, and Larsen & Toubro the most consistent performers, taking them to the top 15 of highest Nifty500 contributors.

In the past month, the Nifty500 has been trading sideways as Nifty VIX, representing the market volatility, rose sharply by 50% over the same time period. What traders call the ‘fear gauge’ has been rising amid concerns that the ruling party may win fewer seats than initially expected.

In this edition of Chart of the Week, we look at the top 15 stocks that drove the Nifty500’s rise in FY24. These stocks accounted for 26.6% of the Nifty500’s 39.1% gain, which translated to an overall contribution of 10.4 percentage points. 

To understand which were the top stocks that drove the surge in the index, we tracked the change in market capitalization for stocks in the Nifty500 and compared it to the total change in the index market cap.

PSU stocks increase their contribution to the Nifty500 index

Among the 15 stocks on our list, three belong to the public sector, specifically the banking and finance domain. Within this sector, IRFC and REC represent financial institutions, while the Life Insurance Corporation of India is from the life insurance industry. The top performer among the three, IRFC rose 458% in FY24, contributing 3.4% to Nifty500’s gains. Meanwhile, LIC of India and REC registered gains of 70.7% and 295.3% in the past fiscal year driving the Nifty500 higher by 1.7% and 1.4% respectively.

Hindustan Aeronautics, a defence company, has risen sharply by 153.2% in the past fiscal year, contributing 1.4% to Nifty500’s gains. The company reported revenue growth of 11% YoY to Rs 29,810 crore in FY24 benefiting from the government’s defence outlay in the budget, which rose by 13% YoY to Rs 5.9 lakh crore in FY24. UBS expects the company’s order book to triple to Rs 2.4 lakh crore by FY26, from that of Rs 80,000 crore at the end of FY23.

Meanwhile, construction company Larsen & Toubro witnessed a 76.4% rise in FY24, contributing 1.6 percentage points to Nifty500’s annual gain. This growth was fueled by the government’s increased infra spending, with a 33% higher allocation of Rs 10 lakh crore for capex in the infrastructure sector in the FY24 budget. In addition, order inflow from international markets from the hydrocarbon and infrastructure segment in Saudi Arabia and the Middle East also boosted its growth.

Reliance and Bharti Airtel gain from market consolidation in the telecom space

In FY24, the oil and gas company Reliance Industries’ share price increased 32.2%, contributing 2.6% to the Nifty500’s overall gain. The company’s EBITDA for FY24 increased 16.1% YoY to Rs 1,78,677 crore, driven by significant growth in its retail and telecom divisions.

Similarly, telecom company Bharti Airtel saw its share price rise by 64.2% in FY24, contributing 1.8% to Nifty500’s gains. The company’s consistent market share expansion and organic improvements in average revenue per user have boosted the company’s profit margins. The company also stands to benefit from a probable tariff hike post-election in H1FY24, as indicated by Chairman, Sunil Bharti Mittal.

Meanwhile, IT major Tata Consultancy Services added 1.4% to Nifty500 as its share price surged 24.4% over the past fiscal year. In FY24, the company witnessed a 25.2% YoY increase in deal wins, with a total contract value amounting to USD 42.7 billion.

Top Adani Group companies surge to pre-Hindenburg levels

Three Adani group companies have made it to the top 15 list, as they rise above pre-Hindenburg levels. The three stocks, namely Adani Enterprises, Adani Ports & SEZ, and Adani Power witnessed impressive gains of 99.7%, 126.1%, and 207.1% respectively in FY24.

However, this surge was also due to a lower base after a substantial correction in the share prices of Adani Group stocks, after allegations from Hindenburg Research that accused Gautam Adani of stock manipulation and accounting fraud.

Even though Adani claimed that the accusations were false, the conglomerate is making an effort to address issues highlighted in the report by repaying debt and reducing promoter share pledges. Investments from GQG Partners, and securing projects such as Dharavi redevelopment have also played to their advantage.

Rising consumer demand drives realty and auto stocks higher

DLF, a realty company, gained 157% in FY24, helping drive Nifty500 higher by 1.4% in the fiscal. This was led by a demand surge for residential properties across top cities in India. The company sold 1,113 luxury apartments priced above Rs 7 crore in Gurugram, generating Rs 7,200 crore in just three days after launch.

In the automobile space, high demand drove Bajaj Auto and Tata Motors' share prices higher by 141% and 147% contributing 1.5% and 2% respectively to Nifty500’s gains in FY24.  Meanwhile, rising discretionary spending and the introduction of platform fees fueled Zomato’s share price growth of 262% in FY24. This resulted in the company’s contribution of 1.7% to Nifty500’s gains in the past fiscal year.

1. UltraTech Cement:

ICICI Direct maintains a ‘Buy’ rating on this cement manufacturer with a target price of Rs 12,430. This indicates a potential upside of 27.1%. In Q4FY24, the company’s revenue went up by 9.4% YoY to Rs 20,554.6 crore, and its net profit increased 35.6% YoY to Rs 2,258.1 crore. This surge in profit was on the back of improved EBITDA per ton at Rs 1,089 in FY24 from Rs 1,005 a year ago. The company reported volume growth of 13% YoY in FY24.

Analysts Vijay Goel and Ankit Shah expect EBITDA per ton to further improve to Rs 1,255 by FY26. They expect further cost reduction of Rs 200-300 per ton leading to improvement in EBITDA over the next three years. They attribute this development to be led by higher usage of low-cost energy from renewable sources and optimising freight costs. They forecast that volumes will grow from 119.1 million tonnes per annum (mtpa) in FY24 to 144 mtpa by FY26 due to capacity expansion of 21.5 mtpa. Analyst Goel and Shah say, “UltraTech is strongly placed to benefit from its aggressive capacity addition plans and its focus on further reducing its cost structure.” Goel and Shah also estimate revenue to grow at 10.8% CAGR over the same period.

2. Maruti Suzuki India:

KR Choksey maintains its ‘Buy’ call on this car manufacturer with a target price of Rs 14,975, indicating an upside of 20.4%. In Q4FY24, Maruti Suzuki reported a 48% YoY growth in its net profit to Rs 3,952.3 crore, while its revenue grew by 20.9% YoY. It sold 5.8 lakh units during the quarter, up by 13.4% YoY. Analyst Unnati Jadhav says, “Maruti Suzuki’s volume growth in terms of domestic business and exports was better than the industry’s.”

Jadhav says that the sequential decline in average realizations led to slightly lower revenue, 1.5% lower than estimated, while sequential gross margin pressure led to lower-than-estimated EBITDA and margin. 

However, the analyst continues to be positive about the firm’s growth due to its capex plans in the medium term, focus on high-demand spaces (SUVs, CNG, and hybrids) along with penetration in electric vehicles, and strength in export markets. She expects margins to be largely steady on the back of better realization and cost reduction. She estimates a revenue and profit CAGR of 12.6% each over FY25-FY26.

3. Ajanta Pharma:

BOB Capital Markets maintains a ‘Buy’ call on this pharma company with a target price of Rs 2,585, indicating an upside of 7.1%. In Q4FY24, the company’s profit rose 65.8% YoY to Rs 202.7 crore while revenue increased by 18.6% YoY. The analyst Saad Shaikh says that the growth was led by a reduction in API prices, logistics costs and tailwinds from increased product shortages in the US.

Shaikh is optimistic about the firm because it has 22 products awaiting US FDA approval, and expects to launch six to eight products in FY25. He believes this will lead to an overall growth of 5-8% in the US business. In India, the analyst expects the company to maintain a 200-300 basis points outperformance over the Indian pharma market for FY25.

Although Ajanta’s management expects logistics costs to escalate due to the ongoing Red Sea crisis, Shaikh says that the EBITDA margin should hold at its current level in FY25. He anticipates Ajanta Pharma achieving a 13% revenue CAGR over FY25-FY26, driven by its continued outperformance over the Indian Pharma Market (IPM), recovery in the US, strong growth in recent quarters, and a good outlook due to the launch of new products.

4. KPIT Technologies:

Axis Direct maintains a ‘Buy’ rating on this IT consulting firm with a target price of Rs 1,750. This indicates a potential upside of 15.6%. In Q4FY24, the company’s revenue increased 30.4% YoY to Rs 1,334.4 crore, while its net profit rose by 47.3% YoY to Rs 164.4 crore. Analyst Omkar Tanksale says, “Strong revenue growth momentum will continue backed by robust deal wins and strong addition of capabilities.”

Tanksale is upbeat as the company outperformed its estimates on all fronts. He attributes this quarter’s 10 bps rise in profit margin  to strong volume growth and a favourable currency mix. He is also positive about future revenue visibility as the company has multiple long-term contracts with the world’s leading automotive players. Tanksale expects KPIT to be one of the fastest-growing companies in Indian IT services moving forward. 

5. Poonawalla Fincorp:

Motilal Oswal reiterates a ‘Buy’ call on this finance company with a target price of Rs 570. This indicates an upside of 19.2%. In Q4FY24, the company’s net profit rose 83.6% YoY to Rs 331.7 crore (beating the brokerage’s estimate) and its net interest income increased by 48% YoY (in-line with the brokerage’s estimates). 

Analysts Abhijit Tibrewal, Gautam Rawtani and Nitin Aggarwal say, “Poonawalla Fincorp is committed to boosting its productivity through digitization and is preparing for growth by introducing new products such as co-branded credit cards (to be launched in the next 2-3 weeks).” The analysts say that the company has laid down a robust foundation for sustainable profitability through initiatives that will lead to lower operating costs, higher business volumes, and robust asset quality. 

The analysts estimate AUM and profit growth of 37% and 39% CAGR over FY25-FY26. They believe that the segments focused by the firm, namely consumer and small business finance, have a huge market opportunity and expect the firm to maintain its NIM of more than 9% over FY25-FY26.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

1. IndiaMART InterMESH:

This software and services company saw an increase of 8.2% in its share price on Thursday following the release of its Q4 and FY24 results. In Q4, the company’s net profit surged by 78.5% YoY to Rs 99.6 crore, beating Trendlyne’s Forecaster estimates by 26%. During the same period, its revenue rose by 30.9% YoY to Rs 391.9 crore, beating Forecaster’s estimates by 23.4%.

Collections in FY24 grew 16% YoY to Rs 480 crore. Within this growth, a 10% increase was attributed to rising average revenue per user (ARPU), while the remaining 6% came from new user additions. The ARPU itself rose by 10.6% YoY to Rs 55,900, as subscribers migrated to higher-priced packages and churn in the gold and platinum tiers decreased. Top-tier subscribers account for above 50% of paid suppliers and approximately 75% of revenue. 

The company's EBITDA margin expanded to 28.1%, compared to 24.6% the previous year, primarily due to reduced sales and marketing costs. Productivity gains from eliminating tier-4 towns and underperforming areas further boosted margins. 

CEO Dinesh Agarwal expressed optimism about IndiaMART's growth potential, noting that the company has only penetrated 40% of his estimated 100 million B2B buyers in India. After a decline in unique business inquiries to 88 million in FY23, inquiries have regained momentum, reaching pre-FY23 levels of 93 million in FY24. Agarwal said, “The company could comfortably exceed 100 million unique business inquiries in FY25.”

Anand Rathi reiterated its ‘Buy’ call on IndiaMART. Analysts at Anand Rathi are positive about the company’s prospects due to its networking effect, negative working capital requirements, asset-light model, and healthy cash balance of Rs 2,340 crore. With a target price of Rs 3,250, IndiaMART InterMESH has a potential upside of 16.1%.

2. Vedant Fashions:

This retailing company has fallen around 1.9% in the past two days after announcing its results. In Q4FY24, Vedant Fashions’ revenue grew by 7.8% YoY, but missed estimates by 2.3%. Its net profit grew by 6.3% YoY to Rs 115.6 crore. However, its EBITDA margins declined by 90 bps YoY to 48.2% during the quarter due to higher raw material costs, finance costs, and depreciation expenses. 

Vedant’s same-store sales growth (SSSG) slipped 3% YoY during the quarter. The company witnessed pressures in Tier 2 and Tier 3 cities due to lower consumer demand. Organized players such as Raymond and Tasva are expanding into Tier 1/2 cities. In addition, new players are also entering the industry. However, Motilal Oswal believes that the company will not lose market share. 

According to Trendlyne’s Technicals, Vedant Fashion’s share price has declined by 28.3%, over the past six months, underperforming the retailing sector by 11.2%. The management highlighted that FY24 performance was impacted due to significantly fewer weddings, muted consumer demand, and the high base last year. Vedant Modi, the Chief Revenue Officer (CRO), during the company’s earnings call said, “Q1FY25 is going to be weak given that there are close to no weddings happening during the quarter. However, Q2 onwards, we are very confident about the business, and that is when things should pick up”.

Vedant Fashion continued its retail expansion by adding three stores during the March quarter and 27 in FY24, compared to 54 stores in FY23. It is now focused on consolidating its smaller stores and moving into larger store formats. Vedant Fashions is also now focusing on the South Indian market. 

Post the company’s performance, ICICI Securities maintains its ‘Add’ rating with a target price of Rs 1,000. The brokerage highlights a slower-than-expected pick-up in consumer demand and rise in competition from branded retailers as key downside risks for the company.

3. ACC:

This cement and cement products manufacturer rose around 5% ahead of its results. It then fell by 2% in the past week post its Q4 numbers release. The company’s share price has increased by 43.3% in the past year, outperforming its industry by 4.8%. In Q4FY24, its profit rose 300% YoY to Rs 944.8 crore, while revenue improved 12.6% YoY to 5,528.5 crore. It beat Trendlyne Forecaster’s net profit estimates by 53.8%. This growth in profitability can be attributed to increased demand, volume expansion, cost reduction, and efficiency improvement efforts. 

Despite an 8% YoY fall in realization due to low cement prices, ACC’s EBITDA margin improved by 5.7 percentage points YoY to 15.5%. Its EBITDA per tonne in FY24 has almost doubled to Rs 830, led by an effort to reduce cost. Raw material and freight costs declined by double digits YoY. CEO Ajay Kapur said, “Securing raw materials at cost-competitive prices, and focused capex will help in cost optimization by 8-10%.”

ACC reported volume growth of 22% YoY to 10.9 mtpa in FY24 (above expectations), thanks to capacity expansions. The company provides long-term visibility on volume growth with its aggressive capacity additions plan. Kapur said, “We are growing stronger over time with our efficiency improvement initiatives. Our current market share is 14% and we target to grow to 20% in FY28.”

The management is positive about the cement industry on the back of the government’s infra push, higher budgetary allocation, green energy transition, demand-supply dynamics, and greater consolidation. They expect higher capacity utilization on demand growth of 8-9%. 

To double its capacity to 140 million tonnes by FY28, the company plans to open 35 new grinding facilities. Post the acquisition in Thoothukudi, Tamil Nadu, it plans new grinding units across Chhattisgarh, Bengal, Maharashtra, Uttar Pradesh, Rajasthan, and Gujarat.

Axis Direct is optimistic about ACC’s volume growth. It expects the firm’s recent launch of a new greenfield integrated unit in Ametha and the complete acquisition of ACCPL to help meet higher cement demand. However, the brokerage is cautious about lower cement prices. The company appears in a screener for stocks with broker price or recommendation upgrades in the past month.

4. MphasiS: 

This IT consulting & software company rose by 2.8% over the past week after it announced its results on 25th April. The firm beat the Trendlyne Forecaster estimates for Q4FY24 for revenue by 1.5%, however missed the net profit estimate by 1.5%. For Q4FY24 the company’s net profit fell by 2.9% YoY to Rs 393.2 crore on the back of rise in finance and depreciation costs, while its revenue rose by 2.1% YoY. The stock shows up in a screener for companies with weak momentum.

The firm’s Total Contract Value (TCV) has declined by 42.7% YoY in Q4FY24 at $177 million. However, the deal landscape has improved overall, especially in the capital market space. Mphasis stands out with the highest revenue concentration from its top ten clients among its peers. This may be now hurting the business, since challenges in the broader economic environment and the trend of insourcing within these top accounts have hindered growth. The revenue from its top client decreased by 4.7% QoQ, while revenues from clients ranked 2nd to 5th declined by 1.2% QoQ. However, large deal wins outside its top 10 clients grew by 73% YoY over FY24.

Citing economic uncertainty, the management has maintained their last year’s margin guidance of 15.25-16.25%. Nitin Rakesh, CEO and MD  of Mphasis said “ Our Total Contract Value for the last four quarters has been around $ 1.38 billion. This quarter, we've seen some pickup in activity, but it's still not fully ramped up. So I think we'll focus on closing the current order book.”

ICICI Securities has maintained a "sell" rating on MphasiS with a price target of Rs 1.950. The brokerage said: “ Although deal conversion is improving and FY25 outlook is positive, these are already built into our estimates. The company’s margin guidance for FY25 was also subpar at 14.6-16%. Factoring in new guidance, we adjust our FY25E/26E EPS by -4.1%/1.9%, factoring in the guided margin. We continue to value the stock on 18x FY26E EPS of Rs 106.”

5. Indian Oil Corp: 

This oil marketing & distribution company’s stock price remained flat at 0.03% over the past week after its decline on Tuesday due to its poor Q4FY24 results was later offset by a price recovery, due to the government’s tax reduction on petroleum crude exports. 

The stock had fallen 4.5% on Tuesday after net profit plunged by 50% YoY to Rs 5,148.9 crore in the quarter, due to a net loss in the petrochemicals segment, as well as higher employee benefits and finance costs. Revenue dropped by 3.1% YoY to Rs 2.2 lakh crore. The share price recovery of  2.7% on Thursday was due to a windfall tax reduction announced by  the Indian government on petroleum crude, which was brought down to Rs 8,400 per metric tonne from Rs 9,6000 per metric tonne. 

The company appears in a screener of stocks underperforming their industry price change in the quarter. Its net profit missed Trendlyne’s Forecaster estimates by 21.6%, while revenue beat Forecaster estimates by 9.4%. Its EBITDA margin contracted by 225 bps YoY to 5.3% due to its gross refining margin (GRM) falling by 44% YoY to $8.4 per barrel. This comes after crude oil prices surged by 16% during Q4FY24. 

Stating its plans for the upcoming financial year, the management says, “We plan to set up a subsidiary to undertake a low carbon, green energy business, with an equity investment of Rs 1,304 crore. We also plan to establish 1 gigawatt (GW) of renewable energy capacity across the country with an investment of 5,215 crore.”

Post results, Nirmal Bang maintains its ‘Sell’ rating on the stock with a target price of Rs 109 per share. This indicates a potential downside of 37.1%. The brokerage expects the company’s refining business to face headwinds due to subdued global macros, as well as growth in EVs and renewable power capacity. It expects the company’s revenue to decline at a CAGR of 5.8% over FY24-26. However, Motilal Oswal thinks otherwise with its ‘Buy’ rating on the stock, as it believes that the refining segment’s performance will remain healthy given the robust oil demand. 

Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.

Investments by superstar investors like RARE Enterprises, Ashish Kacholia, Sunil Singhania, and Vijay Kedia are closely tracked by investors for valuable insights about the market. Their buys and sells help investors identify potentially profitable sectors and stocks. Here we look at the buys made by these superstar investors during Q4FY24.

(You can now also invest in shadow superstar baskets available on Starfolio, which are updated and rebalanced as per Trendlyne's superstar portfolios).

In Q4, even superstar investors got a little spooked by the volatile market, and made fewer additions and more stake sales. The chart below shows the changes in superstar investors' current portfolio net worth. Note that net worth reflects both changes in current holdings as well as new buys and sells. 

Some superstars see a fall in their net worth in Q4FY24

The public portfolio of each superstar investor reflects their investing style and preferred approaches. The following chart gives a breakdown of the dominant sectors in each investor’s portfolio. 

Sectors preferred by superstars

Industry preferences vary among these investors – RARE Enterprises leans towards the textiles apparels & accessories sector, while Ashish Kacholia and Sunil Singhania favour the general industrials sector. Vijay Kedia’s preferred industry is telecom services. 

RARE Enterprises increases stake in a realty stock

Rakesh Jhunjhunwala’s portfolio, currently managed by Rekha Jhunjhunwala and RARE Enterprises, grew by around 7% QoQ to Rs 51,742.8 crore by the end of Q4FY24. During the January-March quarter, the firm did not add any new stocks to its portfolio and increased its stake in just one company – realty stock Valor Estate (formerly DB Realty), buying a 1.7% stake. It now owns 4.7% of the company. The company’s share price rose by 166.2% over the past year. 

Rare Enterprises buys a 1.7% stake in Valor Estate

Ashish Kacholia adds small and micro-cap companies to his portfolio

Ashish Kacholia’s net worth rose by 5.7% QoQ to Rs 2,920.4 crore in Q4FY24. During the quarter, he added five new stocks to his portfolio. He acquired a 6.5% stake in Cosmic CRF. The iron and steel products manufacturer’s share price has risen by 34.8% in the past six months. He also bought a 3.2% stake in each Walchandnagar Industries (industrial machinery company) and Sanjivani Paranteral (pharma company). 

Ashish Kacholia buys stakes in Cosmic CRF, Man Industries and others in Q4

Kacholia also added Man Industries (India), buying a 2.1% stake in the iron and steel products manufacturer. He also introduced Megatherm Induction, an industrial machinery producer, into his portfolio during the quarter and now holds a 1.7% stake.

The ace investor bought a 0.4% stake in Basilic Fly Studio and now holds a 2.8% in the movies and entertainment company. Kacholia increased his stake in Zaggle Prepaid Ocean Services (IT software and services) to 2.4% by buying 0.2% during the quarter. He also bought an additional 0.12% stake in Brand Concepts, taking his holding to 1.56% in the specialty retail company.

Sunil Singhania’s Abakkus Fund adds a minor stake in Hindware Home Innovation

Sunil Singhania’s Abakkus Fund saw its net worth fall marginally by 0.3% QoQ to Rs 2,831.6 crore in Q4FY24. The fund didn’t make any significant buys and its activity this quarter was limited to adding minor stakes to current holdings. It increased its holdings in household appliances manufacturer, Hindware Home Innovation, to 4.5% from 4.4% held previously. In the past year, its share price has fallen by 8.6%.

Abakkus also added minor stakes in Shriram Pistons & Rings and IIFL Securities. It now holds 2.3% in the industrial machinery company and 3.3% in the capital markets company. 

Vijay Kedia adds three companies to his portfolio

Vijay Kedia’s net worth decreased by 15.8% QoQ to Rs 1,242.7 crore in Q4FY24. Kedia added three new stocks to his portfolio during the quarter. He bought a 2.9% stake in airline company Global Vectra Helicorp during the quarter. Its share price rose by 273.9% in the past year.

Vijay Kedia adds Global Vectra, Mahindra Holidays & Reliance Infra in Q4

The marquee investor now holds a 1% stake in Mahindra Holidays & Resorts India. He had cut his stake in the hotel company to below 1% in Q3FY24. He also added Reliance Infrastructure, an electric utility company, by buying a 1% stake. 

Dolly Khanna adds three new companies to her portfolio

Dolly Khanna’s net worth increased by 15% QoQ in Q4FY24 to Rs 490.5 crore, she publicly holds 19 companies. During the quarter, the ace investor continued to expand her portfolio by adding two new companies and raising stakes in six others. Among her new investments, she bought a 1.1% stake in the housing finance company Repco Home Finance. The share price of these companies zoomed 174.4% in the past year. Khanna also added Selan Exploration Technology, an oil exploration & production company by buying a 1% stake. 

Dolly Khanna adds two stocks to her portfolio

During the quarter, Khanna bought a 0.6% stake in sugar stock Zuari Industries, taking her holding to 1.8%. The ace investor added a 0.3% stake in finance (including NBFCs) company Ujjivan Financial Services taking her holding to 1.4%. She bought around 0.1% stake each in construction & engineering company J Kumar Infraprojects , sugar stock KCP Sugar & Industries Corp, fertilizer company Mangalore Chemicals, and hotels company Savera Industries.

Porinju Veliyath expands his portfolio with new additions

Porinju Veliyath’s net worth decreased by 15% QoQ to Rs 191.1 crore in Q4FY24. During the quarter, he added three new companies to his portfolio, and increased investments in one company. The investor added airlines company TAAL to his portfolio in the latest quarter by buying a 1.1% stake. Porinju also bought a 1.7% stake in containers & packaging firm Mitsu Chem Plast.  

Porinju adds TAAL Enterprises and Mitsu Chem to his portfolio

Porinju continued to increase his holding in pharma company Kerala Ayurveda, by adding a 0.4% stake. He currently holds a 5.2% stake in the company. Its share price has risen by 209.7% in the past year.

After the Russia-Ukraine war, PM Modi, in a conversation with Vladimir Putin, said, “This is not a time of war”. But while global leaders welcomed the statement, military spending has shot up worldwide.

Military spending has jumped on the back of rising 'tensions' - the word we use for worsening relationships between heavily armed states. Russia-Ukraine and Israel-Gaza have already caused thousands of deaths. Risky face-offs have been happening between China and its East Asian neighbours, between India and China, and between Israel and Iran.

Each time, these countries backed off from the cliff's edge, before these fights could blow up into a bigger war. But heads of state have recently exchanged increasingly aggressive statements. When Phillipines President Ferdinand Marcos Jr congratulated the winner of Taiwan's election (who the Chinese disliked), China summoned the Filipino ambassador and warned him, "don't play with fire". After China's renaming of various parts of Arunachal Pradesh, Defence Minister Rajnath Singh asked recently, "What if we rename parts of China? Don't try to hurt our self-respect."

As the situation grows more volatile, countries are busy forming military alliances and building in-house defence systems. Heads of state continue to say that peace is crucial, but money talks: global military spending has increased to $2,443 billion in 2023, a 6.3% rise from 2022. This is the highest jump since 2009.

Military spending by the US ($916 billion) and China ($296 billion) account for nearly half of global spending. India spends around $83.6 billion, making it the fourth largest. But unofficial numbers of China's military spend are even higher. According to the American Enterprise Institute, China spent $710 billion - more than twice its official figure - on its military.

To counter the threat of a China that is busy arming itself with long-range drones, nuclear warheads and AI systems, smaller Asian countries are partnering with India, the US and key regional powers like Japan and South Korea. Over the past decade, India has shifted from a non-aligned player to a strategic ally for the US, Japan and Australia. Australian PM Anthony Albanese noted, “China has amassed the greatest military build-up of any nation since World War II. So the regional defence cooperation of India, Japan and Australia is key to bringing stability to the South China Sea”.

While India’s defence manufacturing is small compared to the G20 countries, our defence exports have already risen by 32% to Rs 21,083 crore in FY24. These exports are boosting domestic defence players.

In this week’s Analyticks:

• Defence sector boom: India’s rising defence exports are a win for the domestic industry
• Screener: Rising defence stocks with high Forecaster growth estimates for revenue and EPS in FY24

Let’s get into it.

India’s military expenditure is rising in an uneasy world

India’s skirmishes with China in the Galwan Valley, and the Balakot strikes in Pakistan brought India close to war-like scenarios. As the borders become uneasy, India is ramping up military expenditure by modernising its weapon systems. Most of the spending has been towards procuring more fighter aircraft, unmanned capabilities, helicopters, tanks and artillery guns.

India’s military spending is 28% of China’s official military spending, and just 11% of unofficial numbers. China has also been spending (nearly $43 billion) on R&D and in-house systems. 

China’s military expenditure has increased almost 3 fold in the past 14 years

China has developed 5th generation J-20 fighter planes, which are far superior to India’s indigenous Tejas (developed by HAL). To counter China, India is buying foreign aircraft like Rafael along with existing MIGs. 

Pakistan's military expenditure of around $8.5 billion has been constrained due to its economic crisis. Pakistan is spending around 14.5% of its GDP towards its military, and has strengthened its China relationship by increasing defence imports from China by 43%.

 Pakistan is spending nearly 15% of its GDP on military

Old relationships are also fraying and countries are finding new friends. India’s military partnership with Russia has weakened as China, Pakistan and Russia have grown closer, especially after the Russia-Ukraine war. Russia has been supplying defence systems to both Pakistan and China, which is a serious threat as major Indian defence systems are Russian.

So India is quickly changing its defence strategy - Russia accounted for 76% of India’s procurement in 2014, but only 36% today. Indian defence deals are now being signed with France, the US, Israel, Spain and Germany.

India is building military alliances while increasing defence exports

India is no longer a 'non aligned' country. It has been building alliances with key players and providing military assistance to countries in distress. 

The Quad group, comprising India, the US, Japan, and Australia is working for security in the South China Sea. The group is conducting maritime exercises with smaller nations like the Philippines and Taiwan.

India has also increased defence exports to allies. It dispatched the first batch of its supersonic Brahmos missiles to the Philippines in a $375 million deal. Brahmos missiles are known for their high range and precision with a striking capability range of 500 km,  speeds up to 3.5 Mach and are capable of evading radar systems.

India’s defence exports rise 32% in FY24

To beat back the Turkey-Pakistan alliance, India is supplying Akash missiles to Armenia in a Rs 6,000 crore deal. Countries like Singapore, Egypt, Sri Lanka, UAE, Turkmenistan, and Malaysia have shown interest in buying the indigenously developed Light Combat Aircraft (LCA) Tejas.

Defence firms are seeing big opportunities with offset policies

India’s defence budget increased by 4.7% YoY to Rs 6,21,450 crore in FY25. Most of the spending is toward buying foreign-manufactured fighter aircraft. The government's clause in the defence offset policy (foreign firms need to invest a certain percentage of the deal value in India) is a big boost for domestic manufacturers. The offset policy has resulted in $7.9 billion in new orders for domestic firms. Defence stocks have outperformed the broader indices owing to an uptick in new orders.

Defence stocks outperform the Nifty 50 in the past year by huge margins

Zen Technologies Chairman Ashok Atluri expects the firm's revenue to grow by 50% CAGR for the next four years. Zen Technologies has bagged orders for Tank simulators and anti-drone systems. The firm has an order book size of Rs 1,500 crore with an export order book of Rs 437 crore. 

PSU defence firms like Hindustan Aeronautics and Bharat Electronics have also been winners of the offset scheme. HAL has delivered two Hindustan-228 aircraft to Guyana Defence Forces and has made tie-ups with General Electricals USA for the manufacturing of aircraft engines. HAL expects to double its revenue in FY25 due to order execution of 83 Tejas aircraft.

PSU defence firms have the largest order books in the industry

Bharat Electronics has reported a 13.7% growth in its revenue for FY24. The firm has benefited from export orders of Akash missile systems, communication systems for naval ships, radars, night vision devices and so on. The firm is expected to win orders of around Rs 50,000 crore in FY25 and FY26, and is expected to grow its revenue by 20% CAGR in the same period.

Mazagaon Dock Shipbuilders supplies ships and submarines to the Indian Navy. It has recently won orders for the supply of patrol vessels (Rs 1,612 crore) and hybrid-powered vessels (Rs 350 crore). Its current order book stands at Rs 35,000 crore. It has formed a JV with Germany’s Thyssenkrupp to bid for Rs 45,000 crore worth six P-75 class submarines for the Indian Navy. The firm is also looking at exports to countries like Sri Lanka, Brazil and South America.

While Indian firms are benefiting from increased global military spending, India still lacks key technology and depends on foreign counterparts. Defence tech has been seeing rapid innovations in unmanned systems, drone warfare, deep tech and now artificial intelligence. We need to step up our game by investing in R&D and scaling up domestic manufacturing in these areas, to truly gain an edge in both exports and on the battlefield.

Screener: Rising defence stocks with high Forecaster growth estimates for revenue and EPS in FY24

Defence stocks boast double-digit growth forecasts from analysts

As the result season is ongoing, we take a look at the booming sector of defence and stocks which are touted for growth in FY24. This screener shows defence stocks that have risen over the past year with high durability and Forecaster growth estimates for revenue and EPS in FY24.

Major stocks that appear in the screener are Data Patterns, Bharat Dynamics, Mazagon Dock Shipbuilders, Bharat Electronics and Astra Microwave Products.

Data Patterns has the highest Trendlyne Forecaster estimates for YoY revenue growth at 26.7% in FY24, Forecaster also expects the company’s EPS to grow 32.7% YoY. The company rose by 78.6% over the past year. Nirmal Bang is positive on the stock on the back of high demand from the armed forces for defence electronic systems, and the company’s diversified ability to design and develop in multiple domains – space, air, land and marine. 

Bharat Dynamics also features in the screener with Trendlyne Forecaster estimates for revenue and EPS YoY growth at 16.3% and 49.5% for FY24. The company has risen 94.3% over the past year. Analysts believe that the company’s large order book will provide headroom for growth over the next 3-4 years with order execution picking up in H2FY24 and FY25. Analysts also expect the company to receive an influx of orders as it is the primary provider of guided missiles and torpedoes to the Indian Armed Forces.

You can find more screeners here.