India’s robust economic growth and evolving geopolitical considerations are supporting a long-term growth outlook for defence expenditure.
India’s defence capital expenditure has grown at a CAGR of around 8% since 2017 and is projected to grow at a CAGR of 17% between FY25 and FY27.
This sustained increase in defence spending has attracted investor interest in the sector, with the HDFC Defence Fund emerging as one of the funds in focus after reportedly doubling investors’ money in less than three years since its launch.
India’s position among the top five defence-spending nations globally, coupled with defence expenditure of around 2.5–3% of GDP, has strengthened investor interest in the sector.
Moreover, India’s growing defence manufacturing capabilities and exports to more than 100 countries have reinforced expectations of sustained growth in the domestic defence ecosystem. These structural trends have increasingly drawn investors’ attention towards defence-focused investment opportunities, including sectoral funds such as the HDFC Defence Fund.
So, how much wealth has the fund actually created through SIP and lump-sum investments? Here are complete details about the fund, including its risk profile.
About HDFC Defence Fund
This equity scheme of the HDFC mutual fund house in the thematic sector was launched on June 02, 2023. The direct plan has an expense ratio of 0.72%, whereas the regular plan has a higher expense ratio of 1.49%.
Currently, the scheme does not accept fresh lump-sum investments, including switch-ins. However, investors can register fresh SIPs, including SIP Top-Ups, only on a monthly frequency, subject to a maximum of Rs 25,000 per investor, aggregated at the first holder’s PAN level.
Similarly, fresh STP registrations are permitted only on a monthly frequency, with a limit of Rs 25,000 per investor at the first holder’s PAN level, effective May 4, 2026. The Rs 25,000 limit applies separately to SIP and STP registrations and is in addition to any existing or ongoing SIP or STP investments held by the investor.
As of 31/07/2026, the fund’s AUM was Rs 10,709.17 Cr.
Risk profile: The HDFC Defence Fund’s risk metrics indicate that the fund has experienced relatively high volatility while delivering positive risk-adjusted returns over the three-year period ended June 30, 2026.
Its standard deviation stood at 31.277%, the fund’s beta was 0.825 and its Sharpe ratio was 1.122. The ratios are calculated using monthly data over the three-year period ended June 30, 2026, with a risk-free rate of 5.52%.
Key details:
| Category of Scheme | SECTORAL FUND |
| Fund Manager | Rahul Baijal & Priya Ranjan ( w.e.f April 18,2025) |
| Benchmark | Nifty India Defence Index TRI (Total Returns Index) |
| Investment Plans / Options | Regular Plan, Direct Plan. Under Each Plan: Growth & IDCW Option. The IDCW Option offers following Sub-Options: Payout of IDCW Option; and Reinvestment of IDCW Option. |
| Exit Load | 1% |
Top stock holdings:
| Top 10 Holdings % | % to NAV |
| Bharat Electronics Ltd. | 14.86 |
| Bharat Forge Ltd. | 14.56 |
| Hindustan Aeronautics Ltd. | 11.34 |
| Solar Industries India Ltd. | 11.33 |
| Astra Microwave Products Ltd. | 6.89 |
| MTAR Technologies Limited | 5.43 |
| BEML Limited | 4.85 |
| Bharat Dynamics Limited | 4.22 |
| Eicher Motors Ltd. | 3.7 |
| Premier Explosives Ltd. | 3.57 |
| Source: Fund factsheet | As of 30th June, 2026 |
Sectoral Trend (as on 30th June, 2026)
| Industry | % to NAV |
| Capital Goods | 59.9 |
| Automobile and Auto Components | 22.2 |
| Chemicals | 14.9 |
| Construction | 0.8 |
Market Cap segment-wise exposure:
| Segment | June 2026 |
| Large Cap | 47.60% |
| Mid Cap | 18.80% |
| Small Cap | 31.50% |
HDFC Defence Fund performance
The performance of the fund’s direct plan highlights that while the fund has delivered impressive returns, particularly over the past year, its longer-term performance has not kept pace with its benchmark.
| Particulars | 1 year returns | 3 year returns | Since Inception |
| Scheme Returns (%) | 28.14% | 39.41% | 41.92% |
| Benchmark Returns (%) | 20.68% | 47.41% | 53.56% |
| Additional Benchmark Returns (%) | -0.43% | 8.56% | 10.37% |
| Value of Investment of Rs 10,000 | |||
| Scheme Returns (Rs.) | 12,814.00 | 27,117.00 | 30,279.00 |
| Benchmark (Rs.) | 12,068.00 | 32,068.00 | 38,856.00 |
| Additional Benchmark (Rs.) | 9,957.00 | 12,798.00 | 13,663.00 |
| Source: Fund factsheet. Returns are for the direct plan as of July 31, 2026 | |||
SIP performance
The SIP performance of HDFC Defence Fund across different investment periods are as follows:
| Monthly SIP amount | Investment duration | Returns in % | SIP would have grown to |
| Rs 10,000 | 1 year | 45.05 | Rs 1.47 lakh approx |
| Rs 10,000 | 2 years | 32.14 | Rs 3.24 lakh approx |
| Rs 10,000 | 3 years | 32.5 | Rs 5.71 lakh approx |
Source: Value Research
HDFC Defence Fund vs other defence funds
| Funds | 1 year returns | 3 year returns | 5 year returns | Since inception |
| HDFC Defence Fund | 28.14% | 39.41% | – | 41.92% |
| Motilal Oswal Nifty India Defence Index Fund | 20.11% | – | – | 15.47% |
| Aditya Birla Sun Life Nifty India Defence Index Fund | 24.93% | – | – | 18.11% |
ALSO READ
HDFC Defence Fund: Key portfolio changes in June
According to the fund’s factsheet, the HDFC Defence Fund made a number of significant portfolio changes between May 31 and June 30, 2026.
Over the course of the month, the fund increased its exposure to five firms: Bharat Electronics, Bosch, Mazagon Dock Shipbuilders, TML Commercial Vehicles and BEML.
Interestingly, the fund reported no companies with decreased exposure during the period. Overall, the portfolio changes suggest that the fund continued to strengthen its positioning in companies that could benefit from India’s growing defence manufacturing, infrastructure and capital expenditure cycle.
Why invest in HDFC Defence Fund?
According to the factsheet of the fund, the benefits of investing in this fund are as follows:
The fund predominantly invests in companies operating in the Defence & allied sector.
India’s strong economic growth and geopolitical considerations support a long runway for growth in defence expenditure.
Indian defence players are well positioned to benefit from the Government’s focus on indigenization as well as capitalize on large export opportunities.
A large increase in Research and Development (R&D) expenditure and strong manufacturing capabilities position defence companies to tap into domestic as well as export opportunities.
Indian defence companies display a strong order book and growth potential, with healthy balance sheets.
The fund seeks to invest with a focus on growth and quality at reasonable valuations, with a diversified approach across market capitalizations.
Disclaimer: This article is for informational purposes only and should not be construed as investment, financial, tax, or legal advice. Any illustrations, examples, or return projections used in this article are for explanatory purposes only and do not guarantee actual investment outcomes. The views and opinions expressed by experts quoted in this article are their own and should not be considered investment recommendations. Readers should consult a qualified professional before making any financial decisions.
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