Higher defence spend does little for shares in the sector

MUMBAI: The government's decision to raise defence spending to Rs 1.42 trillion did not whip up interest in stocks of defence-related companies. The disappointment in market--post the interim budget--has turned investors blind towards some positive news as well, brokers say.

At 3 pm, Astra Microwave (up 0.4% at Rs 43), BEL (up 0.5% at Rs 893), L&T (down 4.4% at Rs 669.85), Nelco (down 3.4% at Rs 26.5) and Tata Motors (down 0.9% at Rs 136.60) were not witnessing any buying pressure.

"Overall market is in real bad shape. By not announcing any new measure, the government, it seems, is asking the market and industry to fend for itself. The government, we believe, is conserving resources for worse days of recession. It is not really keen on using resources to bailout certain sectors, which will only uplift some pockets of the economy," said Jagannadham Thunuguntla, CEO, SMC Capitals.

Presenting the interim budget, acting Finance Minister Pranab Mukherjee said the defence allocation has been increased because of the prevailing security environment, which has "deteriorated considerably."

With the total revised expenditure for defence last year standing at Rs 1,14,600 crore, Mr Mukherjee said the increased Plan expenditure for defence this year would be Rs 86,879 crore. Last year's plan expenditure was only Rs 73,600 crore, thereby providing an increase of Rs 13,279 crore this year.