In a significant boost for India's defence manufacturing sector, domestic brokerage firm Motilal Oswal Financial Services has turned optimistic on a select group of defence stocks. This bullish stance comes immediately after the Defence Acquisition Council (DAC) granted approval for capital acquisition proposals worth a massive Rs 79,000 crore.
The brokerage has reiterated a positive outlook for major public sector undertakings (PSUs) like Bharat Electronics (BEL) and Hindustan Aeronautics (HAL). It also views Bharat Dynamics (BDL) and Astra Microwave Products (AMPL) favorably, citing their strong positioning to capitalise on the government's expanding defence procurement pipeline.
Unprecedented Scale of Defence Approvals
The recent clearances, approved during the winter session, have propelled the total defence capital approvals for the financial year 2026 year-to-date to an astonishing Rs 3.3 trillion. This figure, as reported by the Economic Times, is nearly double the annual defence capital outlay of Rs 1.8 trillion, signalling an aggressive push towards military modernisation.
The newly cleared proposals encompass a wide array of critical capabilities for the armed forces. This includes investments in munitions, missile systems, air defence, surveillance, training systems, and new naval platforms. Such a broad-based approval is expected to benefit a large cross-section of the defence industry.
Brokerage's Outlook and Key Target Prices
Motilal Oswal provided a crucial caveat, noting that the Acceptance of Necessity (AoN) approvals are the first step and do not guarantee immediate orders. However, the firm emphasised that the sheer scale and diversity of these clearances are likely to de-risk future order inflows for leading defence PSUs and certain private companies over the next two to four years.
Reflecting its confidence, the brokerage has outlined optimistic target prices for its preferred stocks, indicating significant upside potential from their current trading levels:
- Bharat Electronics (BEL): Target of Rs 500, suggesting a 27.2% upside from the current market price (CMP) of Rs 393.
- Hindustan Aeronautics (HAL): Target of Rs 5,800, implying a 32.5% upside from CMP of Rs 4,377.
- Bharat Dynamics (BDL): Target of Rs 2,000, indicating a 35.8% upside from CMP of Rs 1,473.
- Astra Microwave Products (AMPL): Target of Rs 1,100, pointing to a 12.35% upside from CMP of Rs 979.
Neutral Stance on Zen Technologies
While bullish on the aforementioned stocks, Motilal Oswal has maintained a neutral view on Zen Technologies. It has assigned a target price of Rs 1,400 against the current price of around Rs 1,386, which translates to a very limited upside of approximately 1%.
The brokerage's analysis underscores a transformative phase for India's defence sector, driven by substantial government spending and a clear focus on indigenisation. Investors are closely watching these developments, which promise to create long-term value for companies at the forefront of the country's defence production.
