Should you invest in defence stocks at current levels? Sudip Bandyopadhyay answers

economictimes.indiatimes.com:

" I think defence has been an excellent area and has given investors great return over the last one-one and a half years. But looking at the valuations at which some of these stocks are currently trading, I would definitely advice caution and tell investors not to get in at these levels," says Sudip Bandyopadhyay, Inditrade CapitalWhat is your take regarding the entire defence pack? Is there any name that still looks attractive despite the run up? I think defence has been an excellent area and has given investors great return over the last one-one and a half years.

But looking at the valuations at which some of these stocks are currently trading, I would definitely advice caution and tell investors not to get in at these levels. If somebody is holding onto a Mazagon Dock or BEL or HAL maybe they can wait and keep watching before rushing to book profits or sell their stock.

But fresh position, fresh entry at these levels is dicey. A couple of reasons, I think one while these companies are doing all the right things, getting loads of orders, one has to remember that the valuation at which they are already factors in pretty much everything which they have got till now and also something more.

So it will be a long time before these orders get executed and profits flows in. Also, a lot of time between the expectations of a multiple re-rating again and again may not get actualised once again so it is better to be cautious.

If somebody has to play defence, I would probably look at a stock like Bharat Forge which predominantly is a forging company. There is traction in that business as well including Class 8 trucks in US but they have a very well-developed defence as well as aeronautics business and that is where there is a lot