Super Hit Mutual Fund Scheme: HDFC Defence Fund is an open-ended equity mutual fund, whose direct plan has given a return of 84.11% in the last one year. Those who invested through SIP in this scheme launched by HDFC Mutual Fund last year have also made good profits. We will analyze the reasons for the success of this mutual fund and its portfolio later, but first let’s take a look at the special features of HDFC Defence Fund.
Key points of HDFC Defense Fund
- Scheme Name: HDFC Defense Fund
- When did the scheme start: 2 June 2023
- Benchmark : Nifty India Defence Total Return Index
- Risk level: Very High
- Lock in Period : No Lock in
- Minimum SIP: Rs 100
- Expense Ratio (Direct Plan): 0.71%
- Expense Ratio (Regular Plan): 1.90%
- Asset under management (AUM) as on September 17, 2024: Rs 3,994.72 crore
Fund Manager: Abhishek Poddar (Total 17 years of experience, out of which 13 years in equity research and 1 year in investment banking. This is his first responsibility as a fund manager.)
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HDFC Defence Fund Past Returns
Last 1 Year Return(Direct Plan): 84.11%
Last 1 Year Return(Regular Plan): 81.86%
Last 1 Year Annualized SIP Return (Direct Plan): 69.37%
Last 1 Year Annualized SIP Return (Regular Plan): 67.24%%
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Calculation of return on investment
If someone had invested Rs 1 lakh in lump sum a year ago in the direct plan of HDFC Defence Fund and also invested Rs 5000 every month through Systematic Investment Plan (SIP), then his current fund value would have been around Rs 2.65 lakh. You can check its complete calculation here:
Returns of HDFC Defense Fund Direct Plan
- Lumpsum investment 1 year ago: Rs 1 lakh
- Monthly SIP for 1 year: Rs 5000
- Total investment during 1 year: Rs 1.60 lakh
- Total value of fund after 1 year: Rs 2,65,663 (Rs 2.65 lakh)
- Annualized Return on Lumpsum + SIP in 1 Year: 81.64%
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What is the secret of the success of this fund?
Like any equity fund, the success of HDFC Defence Fund also depends on investing in the right stocks. This fund has been able to generate good returns in the last 1 year because its asset allocation is quite aggressive and its portfolio consists of stocks that give better returns. Let’s take a look at the asset allocation and top stock holdings of this scheme:
Asset Allocation of HDFC Defence Fund
Equity : 94.99%
Cash and cash-like investments: 5.01%
Break-up of equity holding
Investment in Large Cap: 54.77%
Investment in Mid Cap: 8.40%
Investment in Small Cap: 37.26%
Average market cap of the scheme’s share holdings: Rs 45,014 crore
Top holdings of HDFC Defense Fund (more than 5%)
- Bharat Electronics : 19.03%
- Hindustan Aerospace : 17.28%
- Cyient DLM Ltd. : 8.09%
- Solar Industries India Ltd: 7.78%
- Astra Microwave : 7.13 %
- BEML : 6.84 %
- Major Explosives : 5.68 %
- Total Stocks : 20
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Should you invest in HDFC Defence Fund?
HDFC Defence Fund mainly invests in shares of companies related to the defence sector and related services. These include both public and private sector companies. Due to the Government of India’s emphasis on Make in India, companies in this sector have benefited a lot in the last one year. The scheme’s portfolio includes stocks from every segment in terms of market cap. According to the data released on August 30, the Nifty India Defence Total Returns Index, launched on April 2, 2018, has had an average annual total return of 37.15% since its inception. The last one-year total return of this index has been 116.91% and the 5-year total return has been 60.46%. This shows that investments made in the defence sector have full scope to give better returns.
But like any sectoral fund, investing in HDFC Defense Fund is also quite risky. The main reason for this is the lack of diversification and high exposure to small caps. Usually, retail investors are advised to invest in flexi cap or multi cap funds to create a more diversified portfolio instead of sectoral funds. Still, if someone wants to invest in this fund to take advantage of the prospects of India’s defense sector, then he should be prepared to invest for a long period. Also, it should be given a small part of your total portfolio. It is also important to understand your risk taking capacity before investing.
(Disclaimer: The purpose of this article is only to provide information, not to recommend investment in any scheme. Past returns of mutual funds cannot be considered as a guarantee of similar performance in future. Take any investment decision only after consulting your investment advisor.)
