In recent years, India has been focusing on “Atmanirbhar Bharat” by manufacturing its own defence equipment and reducing defence imports, making it a top choice for many investors.
India is a juggernaut when it comes to defence, boasting the 4th largest military in the world among several other accolades. Thus, defence companies play an important role in nation-building.
There are certain factors that you should consider while selecting defence stocks. They are as follows.
1. Geopolitical Risks
Defence stocks are prone to geopolitical risks. Investors should consider this before investing. Border tensions, conflicts between countries, government policy changes, etc. can have a huge impact on defence stocks.
2. Volatility
Defence stocks can be volatile. They can go high when economic uncertainty arises; they are cyclical stocks in nature. Keep this in mind while investing in them.
3. Fundamentals
Usually in India, defence companies are backed by the government. As the government is involved, defence stocks can be considered evergreen stocks for investing.
However, it ensures that apart from this, the rest of the fundamentals such as profit margin, operating revenue, standard financial ratios, etc. are favorable.
Do you invest in defence stocks? What is your criteria to pick defence stocks?
Disclaimer - Investment in the securities market are subject to market risks, read all the related documents carefully before investing.