MUMBAI, Aug. 24 -- Across the six largest defence stocks in India, the companies that make the most money are the ones investors will pay the least for. That is not an impression. Run the correlation between trailing price to earnings and return on equity across Hindustan Aeronautics, Bharat Electronics, Mazagon Dock, Bharat Dynamics, Cochin Shipyard and BEML, and it comes out at minus 0.89. The relationship is almost perfectly inverted, and Monday's session was a small demonstration of how it works.

The sector did not move as a bloc on August 24. Two of the six closed higher and four closed lower, and the ordering had nothing to do with anything that happened during the day. Hindustan Aeronautics fell hardest, 1.88 percent, from a posit...