Outlook for most defence stocks not sunny: G Chokkalingam, Equinomics Research & Advisory

In a chat with ET Now, G Chokkalingam, Founder & Managing Director, Equinomics Research & Advisory Pvt. Ltd., talks about defence stocks.

ET Now: A lot of people are piling on the defence stocks. It is a sector that has been neglected of late; a large portion of the rally today could well have something to do with that. Do you like any of the stocks — BEL, BEML, Astra Microwave, Rolta, M&M, L&T — in the sector?

G Chokkalingam: Among all these names, only BEL has got a sizable defence business. Because 80% of its business is still coming from defence. The stock corrected a lot also over last three-four years view. It has risen from a bottom of 1000 to 1600 now. But if you look at the balance sheet, there is a lot of cash. I like this fact.

I would like to mention that there is limited scope for increasing the defence budget because we are struggling to meet even the revenue component of our defence outlay. This is eating up more than 75% of the total defence budget. So I am not too optimistic on too many stocks in the defence portfolio.