The defence sector has been gaining significant attention from investors looking for unique opportunities in a niche market. One of the most prominent funds in this sector is the HDFC Defence Fund. This fund aims to provide investors with an opportunity to participate in the growth of companies that are a part of the defence and allied sectors.
In this review, we will explore the HDFC Defence Fund, its performance, NAV, portfolio, and the growth options available. We’ll also compare it with other defence mutual funds to help you make an informed decision.
What is HDFC Defence Fund?
The HDFC Defence Fund is an open-ended equity mutual fund that focuses on investing in companies operating in the defence and related sectors. This includes companies involved in the manufacturing of defence equipment, technology, infrastructure, and other related services.
Key Features of HDFC Defence Fund:
- Fund Type: Open-ended equity scheme
- Investment Objective: To provide long-term capital appreciation by investing primarily in equity and equity-related securities of companies engaged in the defence and allied sectors.
- Fund Manager: Managed by experienced professionals who have a deep understanding of the defence sector and its growth potential.
HDFC Defence Fund NFO (New Fund Offer)
The HDFC Defence Fund was launched as a New Fund Offer (NFO), which allowed investors to purchase units of the fund at a fixed price. The NFO period is crucial as it helps the fund house gather the initial corpus to start investing.
The launch of the HDFC Defence Fund NFO was met with enthusiasm due to the growing interest in India’s defence sector, driven by government initiatives and increasing defense budgets.
HDFC Defence Fund NAV (Net Asset Value)
The Net Asset Value (NAV) of the HDFC Defence Fund represents the per-unit price of the fund. It is calculated based on the market value of the fund’s assets minus its liabilities, divided by the number of units outstanding.
As of the latest date 29th August 2024, the HDFC Defence Fund NAV for the regular growth option is INR 22.09, while the direct growth option is INR 22.43.
HDFC Defence Fund Portfolio
The HDFC Defence Fund Portfolio comprises a diverse mix of companies within the defence sector. The fund strategically invests in stocks across various sub-sectors such as aerospace, shipbuilding, defence electronics, and more. The portfolio is designed to capture the growth potential of these companies while managing risks associated with the sector’s volatility.
Top Holdings in the HDFC Defence Fund Portfolio:
Company Name | Sector | % of Total Assets |
|---|---|---|
Bharat Electronics Ltd. | Aerospace & defense | 19.40% |
Hindustan Aeronautics Ltd. | Aerospace & defense | 17.69% |
Bharat Earth Movers Ltd. | Construction vehicles | 8.27% |
Solar Industries India Ltd. | Explosives | 7.86% |
Cyient DLM Ltd. | Industrial products | 7.40% |
Astra Microwave Products Ltd. | Aerospace & defense | 7.05% |
Premier Explosives Ltd. | Explosives | 6.68% |
MTAR Technologies Ltd. | Aerospace & defense | 4.27% |
Larsen & Toubro Ltd. | Civil construction | 3.56% |
InterGlobe Aviation Ltd. | Airline | 3.01% |
HDFC Defence Fund Regular Growth vs. Direct Growth
The HDFC Defence Fund offers two primary growth options: Regular Growth and Direct Growth.
- HDFC Defence Fund Regular Growth: This option is ideal for investors who prefer to invest through intermediaries such as financial advisors or distributors. The expense ratio for this option is slightly higher due to the commission paid to intermediaries.
- HDFC Defence Fund Direct Growth: This option is suitable for investors who prefer to invest directly through the fund house without any intermediaries. The expense ratio is lower compared to the regular growth option, resulting in potentially higher returns over the long term.
Comparison Table: Regular Growth vs. Direct Growth
Feature | Regular Growth | Direct Growth |
|---|---|---|
Expense Ratio | Higher due to distributor commissions | Lower, no distributor commissions |
NAV | Slightly lower due to higher expenses | Higher due to lower expenses |
Suitable for | Investors using financial advisors | DIY investors |
Potential Returns | Slightly lower due to higher costs | Higher due to lower costs |
Performance Analysis of HDFC Defence Fund
The performance of the HDFC Defence Fund has been impressive, given its focus on a niche sector. The fund has leveraged the growth in the defence sector, driven by increased government spending and strategic initiatives.
1-Year Performance
In the past year, the HDFC Defence Fund has delivered a return of 47.59%, outperforming the average return of other defence mutual funds in the market. This performance is attributed to the fund’s strategic stock selection and active management.
3-Year Performance
Over a three-year period, the HDFC Defence Fund has achieved a compounded annual growth rate (CAGR) of 22.59%. The fund’s focus on companies with strong growth potential and robust balance sheets has contributed to its sustained performance.
5-Year Performance
Looking at a longer investment horizon, the HDFC Defence Fund has delivered a 5-year CAGR of 24.54%, reflecting its ability to generate consistent returns in a niche sector.
Why Invest in HDFC Defence Fund?
- Exposure to a Growing Sector: The defence sector in India is poised for significant growth due to increased government spending and policy support. The HDFC Defence Fund provides investors with exposure to this growing sector.
- Diversification Benefits: Investing in the HDFC Defence Fund can provide diversification benefits, as it focuses on a niche sector that is not highly correlated with the broader market.
- Expert Management: The fund is managed by experienced professionals who have a deep understanding of the defence sector, ensuring a strategic approach to stock selection and portfolio management.
How to Invest in HDFC Defence Fund?
Investing in the HDFC Defence Fund is simple and can be done through various channels:
- Directly through HDFC Mutual Fund: Visit the HDFC Mutual Fund website and complete the online application process. Opt for the HDFC Defence Fund Direct Growth option for lower expenses and potentially higher returns.
- Through a Financial Advisor: If you prefer professional guidance, consult with a financial advisor who can help you choose the right growth option based on your investment goals.
- Through Online Platforms: Use online investment platforms like Groww, Zerodha, or Paytm Money to invest in the HDFC Defence Fund.
Our Recommendation
The HDFC Defence Fund offers a unique opportunity for investors to gain exposure to India’s growing defence sector. With its focus on companies with strong growth potential and a strategic portfolio allocation, the fund has demonstrated impressive performance.
Whether you’re looking for long-term capital appreciation or diversification benefits, the HDFC Defence Fund could be a suitable addition to your investment portfolio. However, as with any investment, it’s important to consider your risk tolerance and investment horizon before making a decision.
Frequently Asked Questions
The NAV of the HDFC Defence Fund varies based on market conditions. As of the latest data, the NAV for the regular growth option is INR 22.09, and for the direct growth option, it is INR 22.43.
Yes, the HDFC Defence Fund is designed for long-term capital appreciation, making it suitable for investors with a longer investment horizon who are interested in the defence sector.
The HDFC Defence Fund portfolio includes companies in sectors such as aerospace, defence electronics, shipbuilding, and defence equipment manufacturing.
You can invest in the HDFC Defence Fund directly through the HDFC Mutual Fund website, through a financial advisor, or via online investment platforms like Groww or Zerodha.
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