Motilal Oswal picked Bharat Electronics as its top defence stock. The brokerage said, "In the defence sector, Bharat Electronics remains our top pick." Government approvals worth Rs 13 lakh crore since FY25 helped boost the order pipeline. Many domestic players now expect better growth as missile production opens to private firms.

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Bharat Electronics remains Motilal Oswal Securities' top pick in the defence sector, with the brokerage highlighting a strong order pipeline and improving execution prospects as government approvals expand the total addressable market for domestic defence companies.

In a note on Monday, October 5, the brokerage said the "Defence segment has seen DAC approvals of Rs1.62 lakh crore in FY27 YTD and has a healthy pipeline ahead." Total approvals of "Rs13 lakh crore over FY25-YTD FY27" have helped expand the TAM for domestic players.

The brokerage said the government is opening missile production to Indian private players, reducing single-company dependency. This has been further supported by approval for DRDO to transfer technologies for all conventional missile systems to Indian industry for domestic production, "implying higher private participation and larger TAM for non-PSU players."

Defence ordering was weak during 2QFY27, but Motilal Oswal expects it to pick up as approved AoNs worth Rs 13 lakh crore over FY25-YTD FY27 reach the finalisation stage.

On aircraft programmes, the deadline for submitting the RFP for the AMCA project has been shifted to October 30. HAL's MD has committed to delivering 10 Tejas Mk-1A by March 2027, supported by 10 F404-IN20 engines received till date, 12 more committed by GE Aerospace by December 2026, and 27 completed airframes.

The brokerage said the key monitorables going ahead are "QRSAM (CCS clearance awaited), Akash-NG, P75I (CCS approval awaited), landing platform docks, next-gen corvettes and frigates, Mk1A deliveries, and AMCA announcements, especially on higher private participation."

Motilal Oswal said it prefers companies benefiting from improved ordering across growing themes and those with pricing power or variable pricing contracts amid rising raw material prices. "In the defence sector, Bharat Electronics remains our top pick."