In the past few years, mutual funds investment in India has taken some quick interesting turns. Explore the top defence stocks in India More investors are keeping an eye on defense mutual funds, which is a unique and smart way to support India’s self-reliance in defense while growing your wealth at the same time.
Let’s understand how defense mutual funds work and why they might well fit in your portfolio.
What Are Defense Mutual Funds?
Defense mutual funds mainly focus on companies which are connected to India’s defense and aerospace sectors and these may include:
- Public sector top firms like Hindustan Aeronautics Limited (HAL) and Bharat Electronics Limited (BEL).
- Private firms involved in manufacturing things like defense equipment, drones, and advanced technology.
- Supporting industries also known as ancillary industries that supply raw materials or high-end technology for defense projects.
Why Defense Funds Are Gaining Popularity
India is aiming to become independent under the ‘Atmanirbhar Bharat’ vision. With various modernization in defense and Make-in-India projects, this sector is attracting some big investments.
Here is why more Indians are including them to their mutual funds investment in India plans:
- Government Push: India is planning to spend over $130 billion on the modernization of defense in the next few years. (Source)
- Steady Orders: Giant companies like HAL and BEL have strong order books from the Indian armed forces.
- Export Potential: Defense sectors of India exported over ₹21,000 crore in FY 2023-24, which is a huge hike as compared to ₹1,500 crore in 2016.
- Long-Term Growth: Defense projects mainly run for decades, which is providing stable revenue streams for these companies.
Should You Invest?
Before you invest, you need to keep in mind that defense mutual funds have their own risks:
- Strong reliance on the government orders and policies.
- Cross-border conflicts can impact the stock market and their prices suddenly.
- A limited number of listed defense companies can mean less diversification in your mutual fund portfolio.
So, it’s a smart move to treat defense funds as a sectoral investment, which must be ideally not more than 10% of your best mutual fund portfolio strategy for 2025.
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How to Invest in Defense Mutual Funds
Here is what you should do if you want to add defense mutual funds to your portfolio:
- Research the Fund House: Check if the fund management is experienced and has an excellent track record in thematic and sectoral funds.
- Study the Portfolio: Make sure to see which companies the fund holds and if they are performing strongly.
- Compare with Benchmarks: Always check how the fund has performed in the past vs Nifty Defense Index or sector benchmarks.
- Understand Charges: Make sure to compare the expense ratios and exit loads before you start to invest.
- Diversify Smartly: Combine them well with large-cap, mid-cap, or balanced funds for steady risk and balance out the risks and returns.
If you are still not sure, then talk to a financial advisor about how to choose the right mutual fund in India for your goals.
Pro Tip: always review your funds yearly to make sure that they match with your risk taking capability and long-term goals.
Conclusion
The defense mutual fund in India is offering a new and innovative way to blend patriotism with profits. If you are planning it right, then mutual funds investment in India can now include Bharat’s defense power too. Just make sure to invest wisely, diversify your investment well, and watch your portfolio grow with strong returns.