HDFC Defence Fund Direct Growth

HDFC Defence Direct Growth Fund is a thematic mutual fund launched on June 2, 2023, that aims to capture India’s growing defence industry. It majorly invests in equity and equity-related instruments of Defence and allied sector companies. This includes companies that are deriving at least 10% of their revenue from the defence industry and come under: 

-AMFI’s classification of stocks in the defence sector

-Stocks included in SIDM (Society of Indian Defence Manufacturers) 

-Stocks from any other defence & allied sectors as per the benchmark’s criteria

The fund invests 80% of its assets in companies in the defence sector and the remaining in equity in other sectors, REITs, InvITs, debt, and money market instruments. It is managed by Abhishek Poddar, who brings over 17 years of experience in equity research.

Investment Strategy

HDFC Defence Fund follows a bottom-up approach to picking stocks. This includes focusing on individual stocks to segment companies that show rapid growth, high quality, and reasonable valuation. The fund manager picks stocks across large, small, and mid-cap of the defence industry to ensure the portfolio is a balance of stable and emerging companies.

Taxation on HDFC Defence Fund

Tax on your gains from the HDFC Defence Fund depends on how long you have held the fund for. All equity mutual funds sold within 12 months are considered Short-term Capital Gain (STCG) and investments sold after 12 months are considered Long-term Capital Gain (LTCG). The taxes are as follows:

• Long-term Capital Gain: Exemption of up to ₹1,25,000 and then 12.5%
• Short-term Capital Gain: 20% 

Who Invests in HDFC Defence Fund? 

Investors who believe in India's growing defence capabilities. As India strengthens its defence strategy in a multipolar world, it stands to gain from its enhanced military power. Additionally, the defence sector is continually advancing in technology. However, it's important to note that defence is a highly regulated sector, and any shifts in government policies can significantly impact company performance. This makes it a high-risk investment, suitable for investors with a high-risk appetite and comfort with market volatility.

Allocation & Historical Returns

Currently, the fund's portfolio comprises 35.3% small-cap stocks, 49.39% large-cap stocks, and 9.21% mid-cap stocks.

With an AUM of ₹6532.0 crores, HDFC Defence Fund Direct Growth generated a return of 10.6% in 1 year. while its benchmark index (Nifty 500) generated -3.0% in 1 year, 14.2% in 3 years, and 19.4% in 5 years.