Defence Sector Mutual Funds Face Headwinds

Defence sector mutual funds, both active and passive, have experienced a decline of up to 5% in the past month, with an average negative return of approximately 4.04%. Even the benchmark Nifty India Defence – TRI has lost 5.13% during the same period.

Motilal Oswal Nifty India Defence Index Fund, a passive Defence fund launched in July 2024, has seen the most significant decline, losing 5.21%. HDFC Defence Fund, an active Defence fund launched in June 2023, has lost 2.86%.

While Defence sector mutual funds have historically delivered strong returns, several factors have contributed to their recent underperformance. The discontinuation of lump-sum and systematic transactions in the HDFC Defence Fund on July 22, 2024, has impacted its performance. Additionally, the influx of new Defence funds has increased competition and potentially diluted returns.

Despite the recent downturn, Defence sector mutual funds have shown impressive long-term performance. HDFC Defence Fund, for example, has generated a return of 101% over the past year, with 41.42% and 11.60% returns in the last six and three months, respectively.

Given the recent market volatility and the potential for future fluctuations, investors should carefully consider their investment horizon and risk tolerance before making decisions about Defence sector mutual funds. While the sector has historically offered attractive returns, it’s essential to conduct thorough research and consider factors such as fund management, investment strategy, and market trends.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.