defense sector
The defense sector in India is no longer just a matter of government policy, but has become a solid investment opportunity. More than Rs 6.81 lakh crore was allocated for defense in the Union Budget 2025. It is believed that due to increasing global tensions, this expenditure may increase further in the budget of 2026. The most important thing is that now India is buying about 75% of its defense needs from within the country, whereas five years ago this figure was less than 60%.
Orders received by defense and aerospace companies have increased rapidly. The government aims to export defense worth Rs 50 thousand crore by FY30, whereas in FY25 it was Rs 23,620 crore. For this reason, defense related stocks have given tremendous returns in the last three years. Seeing this opportunity, many fund houses have launched mutual funds on defense theme, so that investors can participate in the growth of this sector.
Invesco India PSU Equity Fund
This fund was started in January 2013 and mainly invests in government companies. As of December 31, its AUM was around Rs 1,449 crore. The expense ratio of the fund is 0.9%, which is considered normal for a thematic fund. About 98% of the fund’s money is invested in shares. Banking, aerospace-defense, power and petroleum sectors have a major share in this.
Its top holdings include SBI, Bharat Electronics, BPCL, Indian Bank and NTPC Green. In the last 10 years, this fund has given an average annual return of 17.87%, which is better than its benchmark.
HDFC Defense Fund
This is a new fund, which was launched in June 2023. Its AUM is around Rs 7,391 crore. This fund invests especially in companies in defense and related sectors. Its expense ratio is 0.8%. About 99% of the fund’s money is invested in equities. Its top holdings include Bharat Electronics, Hindustan Aeronautics, Bharat Forge, Solar Industries and BEML. In the last one year, this fund has given returns of about 13.09%, which has been better than the Defense Index.
Canara Robeco Manufacturing Fund
This fund was launched in March 2024. It is based on manufacturing theme, in which defense and aerospace sector also has a significant share. Its AUM is around Rs 1,642 crore and expense ratio is 0.79%. About 98% of the fund’s investments are in stocks. Its portfolio includes companies from industrials, auto, materials, energy and healthcare sectors. However, its returns in the last one year have been only around 2.74%, which is less than its benchmark.