defense share
At a time when there is pressure on earnings in many parts of the market, defense sector shares are emerging as a support of stability. According to a recent report by Motilal Oswal, while the earnings estimates of small-cap companies are being reduced by an average of 5.5%, the earnings estimates of some big sectors, especially the defense sector, are being increased.
It has been said in the report that earlier there was a trend of reduction in earnings estimates in the covered stocks of Motilal Oswal, now gradually there is a trend of increasing earnings instead. This makes it clear that big and strong companies are proving to be sustainable despite the current market pressure.
Among the big defense stocks, Bharat Electronics (BEL) and Hindustan Aeronautics (HAL) are seen at the forefront. According to the brokerage report, in the three months till the second quarter of FY26, the total earnings estimates of large-cap companies have increased by about 2%, while for mid-cap companies this increase was 3.1%. On the contrary, small-cap stocks remain under pressure due to lack of liquidity and weak performance of some sectors.
Sector wise, apart from defense and related large-cap stocks, earnings estimates have also been increased in oil and gas, telecom, government banks and insurance sectors. Whereas utility and some consumer sectors were seen lagging behind. Motilal Oswal says that even though the performance in different sectors may be uneven, the defense sector still remains stronger than other sectors.
A common concern of investors is whether companies' earnings will be able to increase if nominal GDP growth remains below 10%. On this, Motilal Oswal believes that this concern is being exaggerated. According to the report, the impact of nominal GDP growth on the annual earnings of companies is limited.
Motilal Oswal has estimated 12-15% growth in the earnings of its coverage companies and 15-16% growth in the earnings of the Nifty index for FY26-FY27. According to the brokerage, stimulus measures related to government spending and monetary policies have made the earnings environment better than last year.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
