The HDFC Defence Fund, a unique mutual fund dedicated to the defence sector, has delivered a remarkable 85% return since its inception. Launched in June 2023, this fund currently manages assets worth ₹3,952 crore.
Recent performance highlights
Over the past year, the fund has achieved a return of 76.03%, while it delivered approximately 32.61% in the last six months. This performance is measured against the Nifty India Defence - TRI benchmark, which recorded returns of 100.96% over the past year and 46.36% in the last six months. Investors looking to buy mutual funds online can explore options within this sector to capitalise on these trends.
Key drivers behind the fund's success
The impressive performance of the HDFC Defence Fund can be attributed to several factors. The defence sector has experienced a significant rally, driven by a robust order book, increased defence exports, and heightened government spending on indigenisation and modernisation. According to Nilesh D Naik, Head of Investment Products at Share.Market, these factors have contributed to the fund's stellar performance.
New entrants in the defence mutual fund space
In July, the Motilal Oswal Nifty India Defence Index Fund was introduced, followed by the Aditya Birla Sun Life Nifty India Defence Index Fund and the Motilal Oswal Nifty India Defence ETF in August.
Currently, four defence sector mutual funds are available for investment. Among these, two funds have been operational for just one month, with their performance showing negative returns.
Specifically, the Motilal Oswal Nifty India Defence Index Fund and the HDFC Defence Fund reported negative returns of approximately 5.73% and 0.85%, respectively, over the past month.
Should you invest in defence mutual funds?
Given the recent fluctuations in the defence sector, potential investors might wonder if it's a good time to buy mutual funds online in this sector. Naik advises that while defence-focused funds can offer significant returns, they also come with higher volatility compared to diversified funds. For long-term investment needs, it may be wiser to choose diversified funds and allow professional fund managers to handle sector-specific allocations.
Future developments and investment potential
Groww Mutual Fund has filed a draft with SEBI to introduce a passive fund in the defence sector, but it has yet to launch. For those interested in current options, investing in the HDFC Defence Fund remains a viable choice.
A monthly investment of ₹10,000 in this fund since its inception would have grown to ₹2.25 lakh, reflecting an XIRR of 78.65%. Similarly, a lumpsum investment of ₹1 lakh would now stand at ₹2.19 lakh, showcasing a CAGR of 85.13%. In 2023 alone, the scheme offered an impressive 52.05% return.
Explore investment opportunities today
For investors considering sector-specific funds, the HDFC Defence Fund stands out with its strong track record. When looking to buy mutual funds online, evaluating such funds could be beneficial, especially with the sector's potential for substantial returns.
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