India’s capital goods, defence and electronics manufacturing sectors (EMS) are entering another important phase of growth, according to brokerage firm Motilal Oswal. While concerns remain around higher crude oil prices, geopolitical tension and commodity cost inflation, Motilal Oswal believes several long-term investment themes continue to create opportunities across industrial companies.
According to the Motilal Oswal report, transmission infrastructure, data centres, defence manufacturing and electronics manufacturing services (EMS) remain some of the strongest growth areas for the next few years.
Motilal Oswal has identified a select group of companies that it believes are better positioned to benefit from these emerging trends.
Which stocks are Motilal Oswal’s top picks?
Motilal Oswal believes companies with stronger earnings growth can continue to justify premium valuations.
According to the report, “We remain positive on transmission, data centre, and defence-led capex beneficiaries.”
Motilal Oswal’s preferred large-cap names include Larsen & Toubro, Cummins India and GE Vernova T&D.
Among mid-cap companies, the brokerage prefers Kalpataru Projects International.
In the defence segment, Bharat Electronics remains its preferred pick, while in the EMS space the brokerage continues to favour Dixon Technologies (India).
According to Motilal Oswal, these companies are positioned to benefit from long-term investment trends linked to infrastructure, defense, digitalisation and manufacturing expansion.
Why is Motilal Oswal positive on capex plays?
Motilal Oswal in its report noted that the earnings commentary of nearly 30 companies across industrials, railways and defence indicates that long-term growth opportunities remain intact despite near-term challenges.
The brokerage noted, “Data center, transmission, and defence emerging as multi-year themes.”
India’s growing power requirements, increasing investments in renewable energy, expansion of transmission networks and rising defence spending are expected to drive fresh business opportunities for companies operating in these sectors.
At the same time, private sector capital expenditure is also showing signs of improvement.
As per the brokerage house report, industries such as thermal power, steel, cement, pharmaceuticals, Fast-Moving Consumer Goods (FMCG) and buildings & factories have started contributing to fresh order inflows.
Data centres becoming a major growth driver
One of the biggest themes highlighted by Motilal Oswal is the rapid expansion of data centre infrastructure.
The brokerage believes that increasing adoption of Artificial Intelligence (AI), cloud computing and digital services is creating significant demand for power equipment and industrial products.
Motilal Oswal added, India could see “8-10GW capacity by 2030” in the data centre segment.
Several companies have already started benefiting from this trend.
As per the brokerage report, firms such as ABB, Siemens, Hitachi Energy India and GE Vernova T&D are seeing growing demand linked to data centre investments. For some companies, data centre-related business already contributes around 10-15% of revenue.
Transmission and defence opportunities gaining strength
Apart from data centres, transmission infrastructure remains another major investment theme.
According to Motilal Oswal, around Rs 8 lakh crore of transmission investments are planned till 2030, creating a large opportunity pipeline for companies involved in power infrastructure.
The brokerage report added that several transmission-focused players are already capitalising on this trend.
Defence manufacturing also remains an important focus area.
“In FY26, we witnessed AoN approvals of Rs 6-7 trillion, which we expect to translate into orders over the next 2-3 years,” added Motilal Oswal.
Exports could become the surprise factor
Motilal Oswal also believes export opportunities may provide an additional growth trigger.
Furthermore, Motilal Oswal added that the demand is emerging from the United States due to industrial expansion, while Artificial Intelligence-led investments are creating opportunities for power equipment exports.
The report noted, “Exports can be a joker in the pack, particularly from the US and Middle East.”
The brokerage also expects reconstruction demand in West Asia to create opportunities once geopolitical tensions ease.
EMS sector continues to attract attention
In the Electronics Manufacturing Services segment, Motilal Oswal remains positive on Dixon Technologies.
The report added that the smartphone demand is expected to remain healthy during FY27, while room air conditioner demand also remains strong.
The brokerage highlighted that Dixon is targeting smartphone production volumes of around 32 million units and could benefit from capacity expansion, new partnerships and backward integration initiatives.
Disclaimer: Investment choices should be aligned with your financial goals and risk appetite. The stock picks and market analysis mentioned above are the views of the brokerage firm Motilal Oswal and do not represent the editorial stance of this publication. Readers are advised to consult a SEBI-registered investment advisor before making any buy, sell, or hold decisions based on these recommendations. This disclaimer has been generated using AI to support user well-being and responsible content consumption.