Mutual fund: Defence sector schemes boom; up to 23% return in 6 months

Kolkata: The defence sector in India is generating significant returns for the investors. The mutual funds that are focused on defence and defence-related activities are doing well in tandem. Funds such as HDFC Defence Fund, Motilal Oswal Defence Index Fund, and Aditya Birla Sun Life Defence Fund have generated returns up to 23% in the past six months. Defence funds are already emerging as a darling of an expanding number of mutual fund investors.

The rapid growth in defence funds is an outcome of the push of the government in "Make in India" and domestic defence production. The Centre is encouraging companies, both in the private and public sector, to go for manufacture of defence-related hardware and software and scout for export markets apart from competing for orders from the Indian armed forces.

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The HDFC Defence Fund is recognised by many as the king of this sector. It has generated returns of 23.45% in the past six months. This scheme has an AUM of Rs 7,024 crore, and 90% of its portfolio is invested in defense and related stocks. The fund has significant exposure to major defence-related stocks such as BEL, HAL and Solar Industries. An investment of Rs 1 lakh would have grown to over Rs 2.5 lakh in just 2.4 years.

The Motilal Oswal Nifty India Defence Index Fund is another robust performer, which generated returns of 23.24% in the past six months and 21.91% in the past one year. It is a passive index fund which tracks the Nifty India Defence Index. It invests in stocks such as BEL, HAL, Solar Industries, and Mazagaon Dock Shipbuilders. Major strengths are low expenses and strong tracking accuracy.

Aditya Birla Sun Life Nifty India Defence Index Fund is another robust performer. It also generated a return of 23.42%. This fund is suitable for investors who prefer passive investing and seek stable returns over the long term. The fund has an AUM of Rs 721 crore and invests in major defense stocks such as HAL and BEL.

The ETF-based Groww Nifty India Defence ETF (FoF) is a fund of fund. It has offered returns of 23.68% over the past six months. Its entire investment is in Groww Defence ETF. It has a low expense ratio of 0.21%, which is one of its USPs, especially for short-term investors. One can even kick off SIP with only Rs 500.