Defence stocks have been in focus in recent sessions amid the intensifying West Asia conflict, with escalating geopolitical tensions expected to drive higher global military spending and create fresh opportunities for Indian manufacturers, according to Motilal Oswal.
Defence index traded flat at 8,323.30 at 10.45 am after rising nearly 2 per cent in early trade to 8,488.85 from the previous close of 8,340.60. At the time of writing, MTAR Tech, Astra Micro and Mazagon Dock posted 1-3 per cent gains, while BEL, Data Patterns, Solar Industries and HAL traded flat. Zen Tech and Paras Defence shed up to 3 per cent.
The brokerage said rising tensions in West Asia could trigger a surge in demand for missiles, air-defence systems, surveillance technologies and electronic warfare solutions, expanding the total addressable market for domestic players. It noted that West Asia accounted for a significant share of global arms imports in FY25 and this share could rise further given the evolving security landscape.
Motilal Oswal added that NATO’s earlier directive to member nations to step up defence capital expenditure, along with higher budgetary allocations by the Indian government, strengthens the growth outlook for domestic defence companies.
The brokerage expects companies such as Bharat Electronics, Bharat Dynamics, Solar Industries India, Astra Microwave Products and Zen Technologies to benefit from the expanding market opportunity.
The brokerage has maintained a positive stance, assigning buy calls on BEL (₹520 target price), HAL (₹3,989), BDL (₹1,800) and Astra (₹1,150). It remained neutral on Zen Tech at ₹1,400 target price.
With the government’s updated defence acquisition procedure (DAP) aimed at simplifying procurement, strengthening indigenous content rules and promoting in-house design and innovation, Motilal Oswal believes Indian defence firms are well positioned to capture both domestic and export opportunities.
Bharat Electronics has continued to attract interest with its strong near-term order prospects, including electronic warfare and air defence programmes. Hindustan Aeronautics, supported by deliveries of fighter aircraft such as Tejas Mk-1A and additional orders for transport and trainer jets, remains a core pick with significant forward earnings potential.
Bharat Dynamics’ robust order pipeline, driven by missile and advanced weapon systems contracts spread over the next 18 months, also places it among the top defensive stocks in Motilal Oswal’s universe.
Meanwhile, Astra Microwave and Zen Technologies are seen as key beneficiaries of niche electronics and simulator market growth, with orders and trials pointing to expanding revenue visibility.
The brokerage highlighted that supply chain resilience will be critical amid ongoing geopolitical uncertainty, particularly for high-tech components and advanced systems where India has historically relied on imports. However, with policy support aimed at boosting indigenous production and capital expenditure allocations in defence rising sharply year-on-year, Motilal Oswal expects strong order inflows to continue supporting valuations across the sector.
Investors tracking defence equities have already witnessed steady contract wins and growing investor confidence in companies with strong execution track records. The sector is poised to remain at the forefront of market attention.