Defence stocks: A chance under Trump 2.0

India's defence majors such as Ideaforge Technology Ltd and Hindustan Aeronautics Ltd (HAL) took a beating at the bourses during the recent market sell-off. But under US President Donald Trump's watch, these stocks hold potential for a strong comeback.

- Dipti Sharma

India-US relations have strengthened over the past two decades driven by growing defence cooperation and the US in 2016 designating India as a major defence partner. During Trump's first presidency, India was elevated to Strategic Trade Authorization tier 1 status in 2018, which allowed New Delhi license-free access to a wide range of US military and dual-use tech.

Several key defence agreements, including the Communications Compatibility and Security Agreement, Basic Exchange and Cooperation Agreement, and Industrial Security Annex, were signed, strengthening defence technology collaboration between the two nations.

Under Trump 2.0, the near-term prospects could be a bit negative for Indian defence companies as the US is likely to push for higher defence exports, which would imply imports of completely built units and lesser scope for Indian companies to collaborate with US counterparts, said Deepak Krishnan, an analyst at Kotak Institutional Equities.

But "over the medium term, we believe that there is a potential for India-US defence ties to improve over next four years, which can potentially open up opportunities for Indian defence manufacturers to collaborate with leading US defence companies," he said.