HDFC Defence Fund NFO – Can we capitalize the Growth Potential in the Defense Sector?

HDFC has launched Defence Fund New Fund Offer. This NFO would open for subscription on 18th May, 2023. This mutual fund scheme would invest in defence and allied sector companies. Since it invests in single sector, it is termed as thematic mutual fund and high risk. Should you invest in HDFC Defence Fund NFO? What are the risk factors you should take into consideration before investing in such funds?

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HDFC Defence Fund NFO Issue Details

Scheme Opens 19-May-23
Scheme Closes 02-Jun-23
Scheme reopens for continuous purchase/sale Within 5 business days
Minimum Lumpsum Rs 100
Minimum SIP Rs 500 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load 1% for redemption within 365 days
Risk Very High Risk
Benchmark Nifty India Defence TRI
Fund Manager Mr Abhishek Poddar
Max TER 2.25%

Investment Strategy of the fund

To provide long-term capital appreciation by investing predominantly in equity and equity related securities of Defence & allied sector companies.

There is no assurance that the investment objective of the Scheme will be realized.

Where does the scheme invest?

80% to 100% – Equity and related instruments of defence and allied sector companies

Upto 20% – Other companies

Upto 10% – Units of REITs and InvITS

Upto 20% – Debt and money market instruments

Upto 20% – Units of mutual funds.

HDFC Defence Fund NFO – Why should you invest in such funds?

1) Growth Potential: The defense sector is expected to witness substantial growth due to increased government spending and rising geopolitical tensions. Investing in HDFC Defence Fund provides investors with an opportunity to participate in this growth potential.

2) Diversification Benefits: By allocating investments across various defense-related companies, the HDFC Defence Fund offers diversification benefits. This helps reduce the impact of specific company or industry risks on the overall portfolio.

3) Technological Advancements: The defense sector often witnesses significant technological advancements, which can drive innovation and growth in associated companies. The HDFC Defence Fund aims to capitalize on these advancements, potentially offering investors exposure to innovative and high-growth companies.

4) Strong Order Book: Currently Indian defence companies show strong order book and growth potential with healthy balance sheet.

Risk/Negative Factors of Investing in HDFC Defence Fund:

1) Sector Concentration Risk: The HDFC Defence Fund focuses on a specific sector, namely defense and related industries. Investing in sector-specific funds carries the risk of concentration, as the performance of the fund is closely tied to the performance of the defense sector. Any adverse developments within the sector could impact the fund’s returns.

2) Regulatory and Political Risks: The defense sector is subject to various regulatory and political factors that can influence its performance. Changes in government policies, defense budgets, or geopolitical tensions can impact the fund’s investments and returns.

3) Market Volatility: Like any other equity-based investment, the HDFC Defence Fund is susceptible to market volatility. Fluctuations in stock prices and broader market conditions can impact the fund’s performance.

4) Liquidity Risk: Investments in specific defense companies or related sectors may have limited liquidity, making it challenging to buy or sell securities at desired prices. This lack of liquidity can pose a risk, especially during times of market stress or when attempting to exit the investment.

Performance of existing mutual funds in this category

Currently there is no single mutual fund in this category.

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HDFC Defence Fund NFO – Should you invest or avoid?

In conclusion, the HDFC Defence Fund NFO presents a good opportunity for investors seeking exposure to the growth potential of the defense sector.

It offers positive factors such as the potential for capital appreciation, diversification benefits through investments in defense-related companies, and the credibility of HDFC as an established asset management company.

However, investors must also consider the negative factors, including the concentration risk associated with sector-specific funds and the impact of regulatory and political factors. It is crucial for investors to carefully evaluate their risk tolerance and investment objectives before making a decision.

High risk investors can invest in such funds. One should invest only small portion of their portfolio as it is thematic mutual fund and one can see underperformance for several years.

Data Source: HDFC Defence Fund SID

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Suresh KP


  1. Very detailed analysis.Thank you for your hard work
    You should include the option of a like button as well so that the readers can acknowledge your work

  2. is there any idea of growth potential in defense sector, which is dominated by public sector?
    on what logic hdfc started this fund ? is there any data to justify this sector specific fund?
    how many listed entitiies are there in this sector? where will the funds be invested?
    the whole thing appears hazy

  3. Small cases in defence have out smarted highly paid mutual fund managers in launching
    defence mutual fund NFO .
    I can predict there next move to launch Railway mutual fund.

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