A Defence Mutual Fund is a thematic equity fund that invests at least 80% of its assets in stocks of companies involved in defence, aerospace, and allied industries. These funds aim to benefit from India’s increasing military indigenization and long-term export potential.
As of December 2025, the Defence sector has shown significant divergence from the broader market index. Below is the point-to-point performance comparison:
| Index Name | 1-Year Return | 3-Year (CAGR) | 5-Year (CAGR) |
|---|---|---|---|
| Nifty India Defence Index (TRI) | 74.2% | 52.8% | 41.5% |
| Nifty 50 Index (TRI) | 18.4% | 14.2% | 15.8% |
| Alpha Generation | +55.8% | +38.6% | +25.7% |
| Top Holdings | Weight (%) |
|---|---|
| Hindustan Aeronautics Ltd (HAL) | 22.5% |
| Bharat Electronics Ltd (BEL) | 18.2% |
| Mazagon Dock Shipbuilders | 11.4% |
| Solar Industries India | 9.1% |
Visual: Benchmark holdings distribution by company weightage.
Comparison of specialized defence offerings. Check Latest performance details by visiting scheme names.
| Scheme Name | 1Y Ret (%) | 3Y Ret (%) | Sharpe |
|---|---|---|---|
| HDFC Defence Fund | 76.4% | N/A* | 2.15 |
| Motilal Oswal Defence Index Fund | 73.8% | N/A* | 2.08 |
| ABSL Nifty India Defence Index Fund | 74.1% | N/A* | 2.11 |
| Groww Nifty India Defence ETF FOF | 73.5% | N/A* | 1.98 |
| Mirae Asset BSE India Defence ETF FOF | New Launch | N/A** | — |
While long-term prospects remain strong due to indigenization, valuations are currently high. Staggered investment via SIP is recommended to manage volatility.
Defence funds are thematic; they only invest in aerospace and defence stocks. This makes them more volatile but offers higher potential alpha than diversified funds.
They are taxed as Equity Mutual Funds: 12.5% on LTCG (above ₹1.25L) and 20% on STCG as per current taxation rules.
📅 Last Updated on: May 12, 2026
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