New Delhi: HDFC Defense Fund has doubled investors’ money in just 9 months. During this period it has given a return of 102.26 percent. This mutual fund scheme has given returns of about 38.87 percent in the last three months and about 55.16 percent in the last six months. In the last one year, this scheme has given a return of 130.44 percent. The fund was launched in June 2023 and is managed by Abhishek Poddar. In this, the minimum investment amount for lump sum and SIP investment is Rs 100. This theme based mutual fund scheme focuses only on the defense sector. If an investor had started a SIP of Rs 10,000 every month from the inception of the fund, then today the value of that investment would have been Rs 2.28 lakh. In this way it would have achieved a XIRR (Extended Internal Rate of Return) of 147.90%. That means, for the total amount invested of Rs 1.30 lakh, you would have got Rs 2.28 lakh.
Similarly, if the investor had invested a lump sum of Rs 1 lakh at the beginning of the scheme, its value today would have been Rs 2.45 lakh. That means they would have achieved a CAGR (Compound Annual Growth Rate) of 122.95%.
What is the objective of the scheme?
The investment objective of this scheme is to achieve capital appreciation over the long term by investing primarily in equity and equity related securities of defense and related sector companies. The portfolio of this scheme is diversified across 20 stocks. The highest allocation in this is about 21.22% in Hindustan Aeronautics. It is followed by Bharat Electronics with 19.80% allocation. As of June 2024, the fund was managing assets worth Rs 3,665 crore.
The scheme measures its performance against Nifty India Defense – TRI. The index has given a return of 146.17% in the last nine months. It has given returns of 60.66% and 87.04% in the last three and six months. Its returns in the last one year have been 187.42%.
Should you invest?
It is a thematic mutual fund that invests in the defense sector. This may include companies manufacturing defense equipment, companies providing defense services, etc. The risk with thematic funds is very high. In such a situation, you should take any investment decision only after consulting your investment advisor.
Motilal Oswal MF has also launched the scheme
Motilal Oswal Mutual Fund has also recently launched its index fund based on defense sector. Its name is Motilal Oswal Nifty India Defense Index Fund. It is the first index fund in India to offer the opportunity to invest in shares of defense companies listed in India. The objective of this fund is to provide investors an opportunity to participate in the growth potential of the defense sector. It is an open-ended fund that pegs its performance against the Nifty India Defense Index TRI. It is managed by Swapnil Mayekar and Rakesh Shetty. The minimum application amount in this is Rs 500.
(Disclaimer: The recommendations given in this analysis are those of individual analysts or broking companies, and not of NBT. We advise investors to consult certified experts before taking any investment decision as stock market conditions change rapidly. Can.)
What are the risks associated with investing in sector-specific funds like the HDFC Defense Fund?
Interview between Time.News Editor and Investment Expert
Editor: Welcome to Time.News’ investment insights segment. Today, we have the pleasure of speaking with Sarita Mehta, a well-respected investment strategist and mutual funds expert. Sarita, thank you for joining us!
Sarita: Thank you for having me! It’s a pleasure to be here.
Editor: So, let’s dive right in. The HDFC Defense Fund has been making headlines recently for its impressive performance. It’s reported a staggering 102.26% return in just nine months. What do you think has driven this phenomenal growth?
Sarita: The incredible growth of the HDFC Defense Fund can be attributed to several factors. Primarily, it focuses on the defense sector, which has been experiencing a surge in demand both domestically and internationally. The government’s increased spending on defense and modernization has significantly benefited companies in this space, thus driving up stock prices and, consequently, investor returns.
Editor: That makes sense. It seems like this fund has become particularly popular among new investors. What’s the minimum investment threshold for those looking to get involved?
Sarita: The fund has set an accessible minimum investment amount of just Rs 100 for both lump-sum and SIP (Systematic Investment Plan) contributions. This low entry point makes it appealing to a wide audience, including first-time investors who might be cautious about investing higher amounts.
Editor: For investors who might consider starting a SIP in this fund, can you explain the potential returns? I’ve heard that starting with Rs 10,000 a month can yield quite significant returns.
Sarita: Absolutely! If an investor had begun a SIP of Rs 10,000 from the inception of the fund, their investment of around Rs 1.30 lakh would now be valued at approximately Rs 2.28 lakh, yielding an impressive Extended Internal Rate of Return (XIRR) of 147.90%. It’s a great example of how systematic investing in a high-growth sector can pay off significantly over time.
Editor: And what about those who prefer a lump-sum investment? How have they fared?
Sarita: Those who invested a lump sum of Rs 1 lakh at the launch of the fund would see their investment grow to about Rs 2.45 lakh today, reflecting a CAGR (Compound Annual Growth Rate) of 122.95%. This shows how powerful long-term equity investments can be, especially in a booming sector like defense.
Editor: It’s fascinating how the fund’s structure is designed to appeal to investors. Looking closer, can you explain the investment objective and the stock allocation within the fund?
Sarita: Certainly! The objective of the HDFC Defense Fund is to achieve capital appreciation over the long term by primarily investing in equities of defense and related sectors. The portfolio is diversified across 20 stocks, with Hindustan Aeronautics receiving the highest allocation at around 21.22%, followed closely by Bharat Electronics at 19.80%. This strategic allocation helps mitigate risks while capitalizing on sector growth.
Editor: With the current focus on defense, it seems like a timely investment choice. However, are there risks associated with investing in a fund so specialized in one sector?
Sarita: Always a valid concern. While sector-specific funds can offer substantial returns, they also come with inherent risks. Market volatility can be pronounced in concentrated sectors due to regulatory changes, geopolitical tensions, and other macroeconomic factors. Hence, it’s crucial for investors to assess their risk tolerance and consider diversifying their portfolios even within a thematic investment strategy.
Editor: Wise words indeed, Sarita. Before we wrap up, what advice would you give to investors considering the HDFC Defense Fund in their portfolios?
Sarita: I would advise potential investors to conduct thorough research, understand their investment horizon, and consider their overall financial goals. Investing in a high-performing fund like HDFC Defense can be appealing, but it’s also important to maintain a balanced portfolio that spreads risk across different sectors and asset classes.
Editor: Thank you, Sarita, for your insights on the HDFC Defense Fund. It’s always enlightening to hear your expert analysis in the investment arena.
Sarita: Thank you! It was a pleasure to discuss this with you, and I hope to provide valuable insights to your audience.
Editor: And to our readers, stay tuned for more discussions on investment opportunities and strategies to grow your wealth. Happy investing!