This focused fund has given an 85% return in just one year. Check investment strategy, details before putting your money

HDFC Defence Fund was launched in June last year. Since its inception, the fund has shown impressive performance, delivering an 85% return to investors and amassing total assets exceeding Rs 3,952 crore. Over the last year, the scheme has yielded a return of 76.03%, and in the past six months, investors have seen a return of approximately 32.61%.

The HDFC Defence Fund is a mutual fund that focuses on achieving capital appreciation through investments in companies within the defense and allied sectors. The fund mirrors the Nifty India Defence - TRI benchmark, which recorded a return of 100.96% in the previous year and 46.36% in the last six months. It is important to note that due to its sectoral focus, this fund is considered to have a higher level of risk compared to more diversified equity funds.

A monthly investment of Rs 10,000 made consistently since the inception of the HDFC Defence Fund would have grown to Rs 2.25 lakh now, showcasing an impressive XIRR of 78.65%. Alternatively, a lump sum investment of Rs 1 lakh made at the beginning of the fund's inception would now amount to Rs 2.19 lakh, indicating a remarkable CAGR of 85.13%. Furthermore, analyzing the annual performance, the scheme yielded a significant return of 52.05% in 2023.

The HDFC Defence Fund is projected to achieve a doubling of the invested capital every 2 years. The fund predominantly allocates its capital to sectors including Capital Goods, Chemicals, Communication, Construction, and Services. In comparison to similar funds within its category, HDFC Defence Fund maintains a lower level of investment exposure in the Capital Goods and Chemicals sectors.

The fund's primary holdings consist of prominent entities such as Bharat Electronics Ltd., Hindustan Aeronautics Ltd., Cyient DLM Ltd., Solar Industries India Ltd., and Astra Microwave Products Ltd.

In recent years, the defense sector has emerged as a lucrative investment theme, showing significant growth on stock exchanges. Notably, shares of listed defense companies such as HAL and BEL have experienced substantial appreciation, yielding attractive returns for investors. This uptrend has attracted a surge of interest from investors towards listed defense companies.

Other Defence funds

In June 2024, Motilal Oswal Mutual Fund introduced the Motilal Oswal Nifty India Defence Index Fund, followed by the launch of the Aditya Birla Sun Life Nifty India Defence Index Fund by Aditya Birla Sun Life Mutual Fund in August 2024.

The Motilal Oswal Nifty India Defence Index Fund  has majorly invested in

Company    Percentage of Portfolio
Bharat Electronics Ltd.    19.8%
Hindustan Aeronautics Ltd.    17.85%
Solar Industries India Ltd.    15.46%
Cochin Shipyard Ltd.    7.91%
Mazagon Dock Shipbuilders Ltd.    7.57%
Bharat Dynamics Ltd.    7.04%
Data Patterns (India) Ltd.    5%
Astra Microwave Products Ltd.    4.51%
Zen Technologies Ltd.    3.7%
Garden Reach Shipbuilders & Engineers Ltd.    3.18%

The Aditya Birla Sun Life Nifty India Defence Index Fund has majorly invested in:

Company    Percentage of Portfolio
Bharat Electronics Ltd.    19.4%
Hindustan Aeronautics Ltd.    17.49%
Solar Industries India Ltd.    14.95%
Cochin Shipyard Ltd.    7.75%
Mazagon Dock Shipbuilders Ltd.    7.42%
Bharat Dynamics Ltd.    6.9%
Data Patterns (India) Ltd.    4.9%
Astra Microwave Products Ltd.    4.42%
Zen Technologies Ltd.    3.63%
Garden Reach Shipbuilders & Engineers Ltd.    3.12%