Defence mutual funds lose sheen, fall up to 5% in a month. Should you allocate more?
Defence sector based mutual funds (including active and passive funds) have lost upto 5% in the last one month. These schemes gave a negative average return of around 4.04% in the said period. Only two funds based on the defence sector have completed one month of existence in the market. In the last one month, Nifty India Defence — TRI also lost around 5.13%.
Motilal Oswal Nifty India Defence Index Fund, a passive fund based on defence sector, lost the most of around 5.21% in the last one month. Launched in July 2024, the scheme manages assets of Rs 2,330 crore as on July 2024.
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HDFC Defence Fund, the only active fund based on defence sector, lost around 2.86% in the said time period. Launched in June 2023, the scheme manages assets of Rs 3,930 crore as on July 2024.
The defence sector mutual funds have offered stellar performance over a period of time. What factors made these funds offer negative returns in the last one month?
“The defence stocks had rallied significantly over the past year or so on the back of strong order book and significant increase in the defence exports. The sector has also benefited immensely by the government's increased defense spending with focus on indigenization and modernization. However, rich valuations coupled with less than expected budget outlay for the sector in the recent
