L&T, BEL, KPIL Among Motilal Oswal’s Top 5 Capital Goods Stock Picks; What to Expect from Q1 Earnings FY2026?

The capital goods sector has once again captured investor interest, with brokerage house Motilal Oswal Financial Services reaffirming a bullish outlook on the space. In a detailed report, the firm outlined five top stock picks that it believes are well-positioned to benefit from strong order visibility, improving execution, and favourable policy trends.

Motilal Oswal's Top Five Stocks to Pick: L&T, BEL and More

These stocks include Larsen & Toubro (L&T) and Bharat Electronics Ltd (BEL) in the large-cap category, as well as Kirloskar Oil Engines, Kalpataru Projects International (KPIL), and KEC International (KECI) in the mid-cap and small-cap segment.

Motilal Oswal believes that the capital goods sector is "comfortably positioned" thanks to a combination of four key drivers. First, companies have strong order books that provide healthy revenue visibility for the coming quarters. Second, commodity prices remain favourable, which helps stabilise margins. Third, most firms in the space maintain strong balance sheets that provide flexibility for capital expenditure (capex). Finally, ongoing government initiatives and infrastructure push offer consistent policy support.

Earnings Q1 FY2026 Preview: What to Expect? Check Brokerage's View

In terms of earnings, the brokerage expects the companies under its coverage to post 14% year-on-year growth in revenues for Q1 FY26. This growth is attributed to strong execution and continued order momentum in key verticals such as defence, power transmission, renewable energy, and infrastructure. These areas are seeing heightened activity due to both domestic demand and global export opportunities.

Defence Stock BEL in Focus

Defence, in particular, is emerging as a significant growth engine. According to the report, India's focus on self-reliance and the "Make in India" push in the defence sector are translating into real business for companies like BEL. The Defence Acquisition Council (DAC) has approved Rs 400 billion in emergency procurement for the Indian Armed Forces, which includes technologically advanced systems like surveillance drones, loitering munitions, and anti-drone missiles.

Kirloskar Oil Engines, Kalpataru Projects and KEC International Stocks in Mid-cap and Small-cap Segment

Reflecting this momentum, Motilal Oswal noted that Bharat Electronics (BEL) secured orders worth Rs 73.5 billion in Q1FY26. Meanwhile, KEC International won approximately Rs 68.5 billion, and Kalpataru Projects International received orders totalling Rs 71.5 billion. The report also highlighted the increasing focus on exports, particularly in defence platforms like the Akash missile system, MRSAM, and integrated defence control solutions.

On valuations, the brokerage acknowledged that the capital goods sector has already experienced a degree of rerating. However, it maintains that valuations remain reasonable, particularly for companies involved in power transmission and renewable projects, given the strong outlook and pipeline visibility.

The brokerage firm emphasised that continued earnings momentum and new order wins will be key to sustaining these valuations, especially at a time when private sector capex recovery is still uneven.

Motilal Oswal's positive stance on the capital goods sector is underpinned by robust fundamentals, healthy balance sheets and strong policy support. With a projected 14% YoY revenue growth in Q1 FY26, the brokerage sees its top picks-L&T, BEL, KPIL, KECI, and Kirloskar Oil Engines-as well-placed to benefit from India's infrastructure and defence investment cycle.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.