Is it good time to invest in Defence mutual funds after Rally Up to 39% in 3 Months

Defence mutual funds in India have seen a big jump recently, giving up to 39% in just three months. This quick rise has caught the attention of both everyday and big institutions. What’s driving this rally? Strong support from the government, growing defence exports, and solid profits from top defence companies. 

But with such fast growth, many people are now wondering: Is it good time to invest in Defence mutual funds after Rally Up to 39% , or wait for a better time?

Let’s make it easier to understand. 

What’s Behind the Mutual Fund Rally in 2025?

In the last few months, many defence mutual funds India and sectoral schemes have given much better returns than the broader stock market. The Nifty India Defence Index itself jumped over 33% by June 30, 2025. Big defence companies like HAL, Bharat Electronics, Mazagon Dock Shipbuilders, and Data Patterns have played a major role in this rise. 

Here’s why this mutual fund rally 2025 is happening: 

• The government is strongly promoting Atmanirbhar Bharat, or self-reliance, especially in defence production. 
• In the Union Budget 2025-26, the Ministry of Defence got a big boost with a ₹6.2 lakh crore allocation.  
• Defence exports are also going up fast, India wants to reach ₹50,000 crore in exports by 2028. 
• There is growing interest and confidence among investors in sectoral mutual funds, especially those related to defence. 

Because of these factors, defence mutual funds India have become some of the best performing mutual funds in the financial year 2025-26 so far. 

Top Performing Defence Mutual Funds (Last 3 Months)

Looking for mutual funds that have done really well in the defence sector recently? Here’s a simple snapshot of the top performing defence mutual funds based on their returns over the past 3 months:

Note: returns are based on data as of June 30, 2025. Please remember that the past performance doesn’t guarantee future results. 

Why Defence Mutual Funds Are Gaining Investor Interest 

In 2025, many investors are looking at the mutual fund rally 2025 as a chance to invest in fast-growing sectors supported by the government and one of the hottest picks right now is defence mutual funds India.

Here are few key factors why are more people interested in defence mutual funds:

• The government has stable policies and is reforming defence purchases
• The Indian armed forces are placing big equipment orders 
• There’s strong potential for exporting defence products
• Defence stocks are now being added to major stock market indices and ETFs

All this has made defence mutual funds India one of the most talked-about themes this year. 

Risks You Should Watch Before Investing 

Even though these funds have given strong short-term returns, remember: sectoral mutual funds focus on one area like defence, so the risk is higher. 

Here are the main things to watch out for:

• High ups and downs: These funds can react quickly to news, policy changes, or global tensions
• Not much variety: Unlike general equity funds, these only invest in a few defence-related stocks
• High prices: After a 30–40% rally, many defence stocks are now expensive
• Timing matters: Entering after a big rally can mean you face short-term losses if markets correct

If you are wondering should I invest in defence funds now? It’s important to weigh the growth potential against these risks. 

Who Should Consider Investing in Defence Mutual Funds?

Defence mutual funds may be a good choice if you are:

• An aggressive investor who is okay with high risk
• Planning to stay invested for 3–5 years
• Looking to ass a specific theme like defence to your portfolio
• Someone who strongly believes in India’s long-term defence growth

But if you are a conservative investor or close to your financial goals, it’s better to either stay away or invest only a small portion.

Investments Tips for Sectoral Funds in 2025

• Don’t put too much money in, keep it to 5–10% of your total equity portfolio
• Use SIP (Systematic Investment Plan) to spread out your investment and reduce the risk of bad timing
• Check your fund’s performance every few months, no need to look daily
• Review the sector once a year to see if the growth story still makes sense
• If stocks get too expensive or if policies change, consider exiting slowly

Final Verdict: Buy or Beware?

The recent sharp gains in defence mutual funds India have made them quite attractive, but they also come with high risk. The sector looks promising because of strong government support and rising exports. Still, investors shouldn’t forget that it can be volatile and has its own limits. 

If you’re okay with taking some risk and want to benefit from the mutual funds rally 2025, investing a small amount in defence funds might be a good idea. But if you prefer safety and steady growth, going with a mix of multi-cap or flexi-cap funds is a better option. 

So before you chase big returns, ask yourself: Do you understand the risks? Can you stay invested even when the market goes up and down?

FAQs

What are defence mutual funds?

Defence mutual funds are special types of funds that mostly invest in companies working in defence, aerospace, and similar areas. These are called sectoral or thematic funds because they focus on just one theme or sector. 

Why are defence funds rallying in 2025?

Because the Indian government is spending more on the defence sector, pushing for local production, and companies are showing strong profits. Also, defence exports are rising, which adds to the momentum. 

Are defence mutual funds a good investment now?

Defence mutual funds can be a good option if you’re okay with taking high risk and can stay invested for the long-term. But right now, prices are already quite high, so it’s smart to be a bit careful. 

What are the risks of investing in defence sector funds?

The biggest risks in defence sector funds are that they only invest in one sector, so they can be very volatile.  

How much should I invest in defence mutual funds?

Experts suggest putting just 5–10% of your equity portfolio into defence mutual funds. Starting with a SIP (Systematic Investment Plan) is a smart way to manage the risk.