Mutual funds provide investors with an accessible way to diversify across asset classes and sectors with professional fund management. However, sectoral and thematic funds can face sharp corrections during volatile market cycles. In the last three months, funds focused on defence, PSU, and real estate themes have been some of the biggest losers, falling between 7% and 15%. This article lists these schemes, analyses their performance, and provides guidance on who should consider investing in them and what risks to watch for.
Earlier we wrote the article on 10 Mutual Funds that Crashed the most in the last 1 year in 2025.
Why Mutual Funds are Falling in the Last 3-6 months?
Here are the key reasons.
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Trump Tariff War Impact: Global equity markets saw heightened volatility due to new US tariffs announced by the Trump administration, triggering risk-off sentiment and profit booking in emerging markets like India.
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Sector Rotation: Investors moved away from high-growth thematic sectors like defence and real estate to safer or undervalued sectors, causing sharp declines in these niche funds.
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Overheated Valuations: Many defence, PSU, and realty stocks had rallied significantly in previous quarters; stretched valuations led to steep corrections when earnings growth didn’t match expectations.
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Rising Bond Yields: Higher global and domestic bond yields prompted FIIs to book profits in equities, pressuring mutual fund NAVs.
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Slower Domestic Demand: Realty and PSU themes underperformed due to muted demand outlook, delayed projects, and regulatory hurdles.
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Global Macro Uncertainty: Uncertainty around interest rate trajectories, geopolitical tensions, and currency fluctuations intensified selling pressure, especially in thematic funds with concentrated exposure.
Top 10 Mutual Funds That Fell Between 7% and 15% in the Last 3 Months
We have considered all equity mutual funds including thematic mutual funds / sector funds / global funds that have fallen the most in the last 3 months. Data is as of 31-Aug-25 and data source from ValueResearch and Moneycontrol.
| Fund Name | 3-Month Return (%) |
|---|---|
| Groww Nifty India Defence ETF FoF | -14.91 |
| Aditya Birla Sun Life Nifty India Defence Index Fund | -14.67 |
| Motilal Oswal Nifty India Defence Index Fund | -14.65 |
| Groww Nifty India Railways PSU Index Fund | -13.79 |
| HDFC Defence Fund | -8.90 |
| Tata Nifty Realty Index Fund | -8.43 |
| Nippon India Nifty Realty Index Fund | -8.21 |
| HDFC NIFTY Realty Index Fund | -8.10 |
| Quant PSU Fund | -7.82 |
| Quant Teck Fund | -7.36 |
Earlier we wrote about 10 Mutual Funds that Crashed the most in the last 6 months in 2025 which contains a mix of IT, Technology, Telecom and mid-small IT companies, however the above funds are majorly from Real Estate, Defence, PSU etc.,
Deep Dive into these Top 10 Mutual Funds That Fell Between 7% and 15% in the Last 3 Months
Many of these mutual funds have been launched in the last few months to few years and we do not have performance history in the last 3 or 5 years, hence we have given as “N/A” that indicates not applicable.
#1 – Groww Nifty India Defence ETF FoF
Investment Objective: To seek to generate returns by investing predominantly in units of the Groww Nifty India Defence ETF, which aims to track the Nifty India Defence Index, subject to tracking error and expenses.
- 3-Month Return: -14.91%
- Annualised Returns:
- 1 Year: N/A
- 3 Years: N/A
- 5 Years: N/A
- Who Can Invest:
- Investors bullish on India’s long-term defence sector growth.
- Suitable for aggressive investors with a long-term horizon.
- Risk Factors:
- Sector concentration risk.
- Sensitive to government policies, defence spending, and geopolitical events.
#2 – Aditya Birla Sun Life Nifty India Defence Index Fund
- Investment Objective: To provide returns that closely correspond to the total returns of the Nifty India Defence Index (TRI), subject to tracking error.
- 3-Month Return: -14.67%
- Annualised Returns:
- 1 Year: N/A
- 3 Years: N/A
- 5 Years: N/A
- Who Can Invest:
- Passive investors seeking pure defence sector exposure.
- Suitable for those with high-risk tolerance. Earlier we wrote about about this mutual fund as part of 8 Mutual Fund Schemes with 3 Months Returns Between 20% to 54%.
- Risk Factors:
- Defence sector volatility, regulatory changes.
- Limited diversification.
#3 – Motilal Oswal Nifty India Defence Index Fund
- Investment objective: To replicate/track the Nifty India Defence Index (TRI) and deliver index-like returns before expenses and tracking error.
- 3-Month Return: -14.65%
- Annualised Returns:
- 1 Year: 7.03%
- 3 Years: N/A
- 5 Years: N/A
- Who Can Invest:
- Long-term investors looking for passive exposure to a growing defence theme.
- Risk Factors:
- Index concentration risk.
- Sensitive to order inflows and government defence budgets.
#4 – Groww Nifty India Railways PSU Index Fund
- Investment objective: To generate returns that closely correspond to the Nifty India Railways PSU Index (TRI) by investing in its constituent securities, subject to tracking error.
- 3-Month Return: -13.79%
- Annualised Returns: N/A
- Who Can Invest:
- Investors bullish on PSU and railway infrastructure growth.
- Suitable for thematic investors.
- Risk Factors:
- PSU sector volatility.
- Dependence on government policies.
#5 – HDFC Defence Fund
- Investment objective: To achieve long-term capital appreciation by investing predominantly in companies forming part of the defence and allied ecosystem (aerospace, shipbuilding, electronics, cyber, etc.) across market caps.
- 3-Month Return: -8.90%
- Annualised Returns:
- 1 Year: 2.01%
- 3 Years: N/A
- 5 Years: N/A
- Who Can Invest:
- Aggressive investors betting on long-term defence sector opportunities. This mutual fund is part of our earlier article 12 Mutual Funds Outperformed in Last 2 Years with 75% to 118% Returns.
- Risk Factors:
- Sector-specific volatility.
- High concentration in defence stocks.
#6 – Tata Nifty Realty Index Fund
- Investment objective: To track the Nifty Realty Index (TRI) and provide returns commensurate with the performance of the underlying index, subject to tracking error.
- 3-Month Return: -8.43%
- Annualised Returns:
- 1 Year: -18.13%
- Who Can Invest:
- Investors looking for a low-cost way to invest in real estate growth.
- Risk Factors:
- Cyclical real estate sector.
- Interest rate sensitivity.
#7 – Nippon India Nifty Realty Index Fund
- Investment objective: To replicate/track the Nifty Realty Index (TRI) and deliver index-linked returns before expenses and tracking error.
- 3-Month Return: -8.21%
- Annualised Returns: N/A
- Who Can Invest:
- Thematic investors betting on real estate sector revival.
- Risk Factors:
- High sector cyclicality.
- Market volatility.
#8 – HDFC NIFTY Realty Index Fund
- Investment objective: To provide returns that closely correspond to the NIFTY Realty Index (TRI) by investing in its constituent stocks, subject to tracking error.
- 3-Month Return: -8.10%
- Annualised Returns:
- 1 Year: -17.37%
- Who Can Invest:
- Long-term investors seeking passive real estate sector exposure.
- Risk Factors:
- Valuation swings.
- Sector concentration.
#9 – Quant PSU Fund
- Investment objective: To seek long-term capital appreciation by investing predominantly in equity and equity-related securities of Public Sector Undertakings (PSUs) and government-linked enterprises across sectors and market caps.
- 3-Month Return: -7.82%
- Annualised Returns:
- 1 Year: -22.69%
- Who Can Invest:
- Aggressive investors seeking opportunities in PSU stocks.
- Risk Factors:
- PSU underperformance.
- Government policy risk.
#10 – Quant Teck Fund
- Investment objective: To pursue long-term capital growth by investing mainly in technology and technology-enabled companies (IT services, software, electronics, digital platforms, telecom/media, and related themes) across market caps.
- 3-Month Return: -7.36%
- Annualised Returns:
- 1 Year: -16.84%
- Who Can Invest:
- Investors bullish on technology stocks with high-risk appetite.
- Risk Factors:
- Global tech sector volatility.
- Stock-specific risks.
What Should Investors Do Now?
- Reassess your investment horizon — consider staying invested if you have a long-term outlook.
- Diversify to reduce concentration risks. Check out our earlier article on 13 Wealth Builder Mutual Funds with 5 Star Rating from Value Research and our views on this. This could add some guideline in creating a mutual fund portfolio.
- Use corrections to add selectively if you believe in the theme’s fundamentals.
- Track sector and policy developments closely.
Conclusion
The last three months were tough for sectoral and thematic funds, particularly those focused on defence, PSUs, and real estate. While short-term corrections may feel painful, they can present opportunities for disciplined investors with a long-term vision. Always align investments with your goals, risk appetite, and time horizon.
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yes, sir big investor may be trapped by another big FII .
while in stock market Stop loss.
Need not be. Market crashes are part of the investing journey. Just be silent and continue to invest.