Multibagger shipbuilding stocks Mazagon Docks, Cochin Shipyards, Garden Reach rally up to 21% this week. Should you buy?

Shipbuilding stocks were booming on Thursday amid news developments, and Union Budget hopes. Shares of Mazagon Dock Shipbuilders surged over 6% to touch 52-week and surpassed ₹1 lakh crore in market cap for the first time in a bull market. The other stocks that followed the 52-week high club were Cochin Shipyard, and Garden Reach Shipbuilders & Engineers. Shares of BEML, Bharat Electronics, were all trading higher during Thursday's session.

Technical analysts, highlighted that Mazagon Dock Shipbuilders, Cochin Shipyard, Garden Reach Shipbuilders & Engineers shares have seen good momentum in last few weeks indicating a continuation of uptrend. This week, shares of Mazagon Docks have gained 15%, Garden Reach Shipbuilders have surged 21%, and Cochin Shipyards have jumped 18%.

“The volumes during upmove are good which hints at strong buying interest by market participants. However, the momentum reading on the lower time frame charts are in an overbought zone and hence, traders are advised to keep a buy on dip approach for these names,” advised Ruchit Jain, Lead Research Analyst at 5paisa.

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According to newscirculating in the market, the Ministry of Defence has produced a list of 346 defenceequipment items whose imports would cease and whose manufacture will be progressively expanded. This newsbolsteredthe sentiment for Shipbuilders stocks.

Hindustan Aeronautics (94 items), BEL (71 items), BEML (17 items), Mazagon Dock Shipbuilders (7 items), Garden Reach Shipbuilders & Engineers (4 items), and Bharat Dynamics (3 items) were the ones who were allocated, according to market participants.

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"In line with this efforts according to unconfirmed news circulating in the market, Ministry of Defence may have released a list of ~350 defence equipment whose production will be increased, which will boost the sector in medium to long term, "said Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities.

Tapse highlighted that the Modi-led government is working hard to ensure the Indian defence sector gets a bigger push in the upcoming budget, encouraging manufacturers to raise production, gradually reduce imports, and also target raising exports. Despite ongoing efforts to boost the defence sector, India continues to hold the title of the world's largest arms importer, which is concerning to the government. On this concern, defence Minister Rajnath Singh had recently emphasized the importance of self-reliance in defence production and increased capacity to meet the country's defence needs, and he also mentioned that without self-reliance, India cannot take independent decisions on global issues in line with its national interests.

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Investors have received multibagger gains from the shares of Mazagon Dock Shipbuilders (up 282.44%), Cochin Shipyard (up 818.51%), and Garden Reach Shipbuilders & Engineers (up 340.25%) over the course of a year.

“All shipping stocks are in buzz and have registered strong gains in the morning sessions. All these stocks are trading in uncharted territory, and considering the volume activity is expected to move further higher, fresh entries at current levels however won't be recommended as indicators are overbought,” said Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.