India’s defence sector has remained in focus over the last few years due to rising government capital expenditure, increasing domestic manufacturing, and the long-term “Make in India” defence theme.
With higher allocation towards indigenous defence procurement and growing participation from private firms, many investors have started tracking defence-focused mutual funds and ETFs closely.
One such recently launched fund is the Mirae Asset BSE India Defence ETF Fund of Fund (FoF).
A Fund of Fund (FoF) is a mutual fund that does not directly invest in stocks. Instead, it invests in another mutual fund or ETF. This allows investors to get exposure to a basket of defence stocks through a single mutual fund investment.
In this editorial, we are going to understand the Mirae Asset BSE India Defence ETF FoF, including its investment strategy, sector allocation, underlying holdings, and the key risks investors should understand before considering this thematic fund.
#1 Mirae Asset BSE India Defence ETF FoF Key Details
The Mirae Asset BSE India Defence ETF FoF is an open-ended Fund of Fund scheme that primarily invests in units of the Mirae Asset BSE India Defence ETF.
The scheme was allotted on 23 February 2026, making it a relatively new thematic mutual fund in the Indian market.
As of 30 April 2026, the fund’s Assets Under Management (AUM) was Rs 46 crore.
The base expense ratio of the fund is 0.08% for the Direct plan and 0.56% for the Regular plan. However, as this is a Fund of Fund structure, investors also bear the recurring expenses of the underlying ETF, which has an expense ratio of 0.28%.
What is the Investment Strategy of Mirae Asset BSE India Defence ETF FoF?
The investment objective of the scheme is to generate long-term capital appreciation by investing predominantly in units of the Mirae Asset BSE India Defence ETF.
The underlying ETF tracks the BSE India Defence TRI, which provides exposure to companies involved in defence manufacturing, aerospace, industrial manufacturing, shipbuilding, defence electronics, and related sectors.
The broader defence theme has remained in focus due to the Indian government’s capital outlay of around Rs 2.19 lakh crore up to FY27, with nearly 75% of procurement for domestic manufacturers.
The underlying index currently consists of 34 companies spread across large-cap, mid-cap, and small-cap segments, helping diversify exposure within the defence ecosystem itself.
Which Sectors Does Mirae Asset BSE India Defence ETF Invest in?
If we look at the sector-wise allocation of the underlying ETF:
Top Sector Allocation
| Sector Name | Allocation (%) |
| Aerospace & Defense | 48.88% |
| Industrial Manufacturing | 12.11% |
| Chemicals & Petrochemicals | 12.00% |
| Construction | 4.80% |
| Automobiles | 4.49% |
Source: Fund Factsheet
The portfolio has the highest exposure towards Aerospace & Defense companies, which account for nearly 49% of the allocation.
Apart from core defence businesses, the ETF also has exposure towards industrial manufacturing, chemicals, electrical equipment, and automobile-related companies that are connected to the broader defence supply chain ecosystem.
If we look at the stock holdings of the fund:
Top 10 Holdings
| Stock Name | Portfolio Weightage (%) |
| Hindustan Aeronautics Limited | 14.91% |
| Bharat Electronics Limited | 13.08% |
| Solar Industries India Limited | 11.84% |
| Mazagon Dock Shipbuilders Limited | 6.57% |
| Larsen & Toubro Limited | 4.80% |
| Cochin Shipyard Limited | 4.58% |
| Mahindra & Mahindra Limited | 4.49% |
| MTAR Technologies Limited | 4.30% |
| Adani Enterprises Limited | 4.28% |
| Bharat Dynamics Limited | 3.93% |
Source: Fund Factsheet
The portfolio is relatively concentrated towards a few large defence-linked companies, with Hindustan Aeronautics and Bharat Electronics together accounting for more than 27% of the allocation.
The ETF also includes exposure towards shipbuilding, explosives manufacturing, industrial engineering, and precision manufacturing businesses which linked to India’s defence ecosystem.
What Are the Risks of Mirae Asset BSE India Defence ETF FoF?
Like every thematic mutual fund, the Mirae Asset BSE India Defence ETF FoF also comes with certain risks that investors should understand.
- Thematic Concentration Risk: Unlike diversified equity funds, this scheme is focused on the defence ecosystem. This means the portfolio performance is highly dependent on how the defence sector performs over time. Any slowdown in defence spending, policy changes, or weak sector sentiment can impact returns significantly.
- Dependency on Government Policies: A large part of the defence sector growth story currently depends on government spending, procurement orders, and localisation policies. Any reduction in defence allocation, delays in order of execution, or change in domestic procurement priorities could affect companies within the index.
- Dual Expense Structure: As this is a Fund of Fund structure, investors bear the expenses of both the FoF and the underlying ETF. This dual-layer cost structure may slightly impact the final net returns compared to directly investing in an ETF.
- No Long-Term Track Record Yet: The scheme was launched recently and thus, there is no long-term performance history available across different market cycles, making it difficult for investors to evaluate how the fund may behave during volatility or sector corrections.
Who Should Consider Mirae Asset BSE India Defence ETF FoF?
Overall, the Mirae Asset BSE India Defence ETF FoF provides exposure to India’s defence manufacturing theme through a passive ETF structure.
The portfolio is positioned towards companies expected to benefit from increasing localisation, defence capital expenditure, and long-term manufacturing opportunities within the sector.
However, investors should also understand that this is a high-risk thematic fund with concentrated sector exposure and dependence on government-led growth trends.
As the fund is relatively new and does not yet have a long-term track record, investors should carefully evaluate their risk appetite, investment horizon, and portfolio allocation strategy before considering exposure to such thematic sectors.
Happy investing.
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