Guns, Gains, and Growth—HDFC Defence Fund Marches to 60% Return

Image Source: The Economic Times

India's first defence-themed mutual fund, HDFC Defence Fund, has turned two since it was launched in June 2023 and has given a scintillating 57.71% return as on May 30, 2025. The fund has surpassed other market indices and turned out to be a star performer amid India's increasing focus on domestic defence production and increasing global geopolitical tensions.

1. Performance Snapshot

Total Return Since Inception: 57.71% (Regular Plan – Growth Option)
Benchmark Return (Nifty India Defence TRI): 89.96%
Nifty 50 TRI Return (Same Time Period): 16.89%

SIP Performance:

₹10,000 monthly SIP since inception (₹2.4 lakh cumulative) is now worth ₹3.7 lakh
Annualized SIP return (XIRR): 48.24%

2. Portfolio Highlights

The portfolio has a concentrated equity portfolio with over 95% in defence and defence-related industries. Top stocks are:

Bharat Electronics Ltd (BEL) – 19.04%
Hindustan Aeronautics Ltd (HAL) – 17.24%
Solar Industries India Ltd – 15.68%
BEML Ltd – 10.25%
Astra Microwave Products Ltd – 6.03%

Its position was taken over by fund managers Rahul Baijal and Priya Ranjan in April 2025, as the fund maintained its active management strategy.

3. Sectoral Tailwinds

Make in India & Atmanirbhar Bharat initiatives have driven defence capex and procurement.
India's defence exports grew to an all-time high of ₹23,622 crore in FY25, from ₹686 crore in FY14.
Increased global demand and alliances have strengthened the medium-term fortunes of the industry.

4. Investors' Caution

The returns are spectacular, but experts caution thematic funds carry greater risk due to sector concentration. Investors must: