Defence is an evolving sector that is considered the fastest-growing industry and is seeing increased investment from the government, and also from the global perspective because India is promoting self-reliance. If you want an investment opportunity in such a growing industry, you can invest indirectly in the industry by choosing Defence Mutual Funds, which also generate good profits. Now, let’s explore the best Defence Mutual Funds to invest in the year 2025. Here is a summary of the best Defence Mutual Funds that will generate profits in the year 2025.
Why Invest in Defence Sector Mutual Funds?
Defence sector mutual funds are largely engaged in defence manufacturing, aerospace, etc. Such mutual funds are considered thematic mutual funds, which essentially concentrate on a particular sector instead of the entire market. Due to the government’s initiative in the “Make in India” campaign along with an increase in defence spending, there has been substantial growth in these mutual funds.
Top 5 Defence Sector Mutual Funds for 2025
Here are the best defence sector mutual funds in India for 2025, based on AUM, recent returns, and expert analysis:
| Rank | Fund Name | AUM (₹ Crore) | Key Holdings | 1-Year Return (%) |
|---|---|---|---|---|
| 1 | HDFC Defence Fund | ₹4,975.51 | Bharat Electronics, Hindustan Aeronautics, Solar Industries, Bharat Forge, BEML | 29.47 |
| 2 | Motilal Oswal Nifty India Defence Index Fund | ₹2,875.46 | Bharat Electronics, Hindustan Aeronautics, Solar Industries, Bharat Forge, Mazagon Dock | 19.85 |
| 3 | Aditya Birla SL Nifty India Defence Index Fund | ₹391.11 | Bharat Electronics, Hindustan Aeronautics, Solar Industries, Bharat Forge, Mazagon Dock | 19.26 |
| 4 | Groww Nifty India Defence ETF FoF Fund | ₹34.12 | Bharat Electronics, Hindustan Aeronautics, Bharat Dynamics, Mazagon Dock, Cochin Shipyard | 37.00 |
| 5 | Invesco India PSU Equity Fund | – | Bharat Electronics, Hindustan Aeronautics, Solar Industries, Bharat Dynamics, Astra Microwave | 16.73 |
List of the top 5 Best Defence Sector Mutual Funds
#1. HDFC Defence Fund
HDFC Defence Fund is one of the largest and most popular defence sector mutual funds in India. It invests directly in leading defence and allied capital goods companies like Bharat Electronics, Hindustan Aeronautics, Solar Industries, and Bharat Forge. The fund has delivered impressive returns, with a 1-year return of 29.47% as of September 2025. It’s actively managed, meaning the fund manager selects the stocks based on market conditions and sector trends.
#2. Motilal Oswal Nifty India Defence Index Fund
Motilal Oswal Nifty India Defence Index Fund is a passively managed index fund that tracks the Nifty India Defence Index. It invests in the same companies as the index, including Bharat Electronics, Hindustan Aeronautics, Solar Industries, Bharat Forge, and Mazagon Dock. The fund has delivered a 1-year return of 19.85%, making it a solid choice for investors seeking exposure to the defence sector.
#3. Aditya Birla SL Nifty India Defence Index Fund
Aditya Birla SL Nifty India Defence Index Fund is another passively managed index fund that tracks the Nifty India Defence Index. It offers diversified exposure to leading defence and aerospace companies like Bharat Electronics, Hindustan Aeronautics, Solar Industries, Bharat Forge, and Mazagon Dock. The fund has delivered a 1-year return of 19.26%, making it a reliable option for long-term investors.
#4. Groww Nifty India Defence ETF FoF Fund
Groww Nifty India Defence ETF FoF Fund is a Fund of Fund (FoF) that invests in the Groww Nifty India Defence ETF. This structure gives investors cost-efficient access to top-performing defence industry stocks, including Bharat Electronics, Hindustan Aeronautics, Bharat Dynamics, Mazagon Dock, and Cochin Shipyard. The fund has delivered a 1-year return of 37%, positioning it among the best-performing defence sector mutual funds in India.
#5. Invesco India PSU Equity Fund
Invesco India PSU Equity Fund is an actively managed equity fund that allocates a significant portion of its portfolio to defence sector stocks. Its top holdings include Bharat Electronics, Hindustan Aeronautics, Solar Industries, Bharat Dynamics, and Astra Microwave. The fund has delivered a 1-year return of 16.73%, making it a good option for investors seeking exposure to the defence sector through a diversified PSU-focused fund.
Factors to Consider Before Investing
Before investing in defence sector mutual funds, keep these points in mind:
- Sector Concentration: Defence sector funds are thematic, meaning they are concentrated in a specific sector. This can lead to higher returns but also higher risk compared to diversified funds.
- Performance: Check the fund’s past performance, AUM, and expense ratio before investing. Funds with higher AUM and lower expense ratios tend to be more stable.
- Risk Tolerance: Defence sector funds are considered high-risk due to their sector concentration. Only invest if you have a high risk tolerance and a long-term investment horizon.
- Market Conditions: The defence sector is influenced by government policies, defence budgets, and global geopolitical events. Stay informed about these factors to make better investment decisions.
The Bottom Line
Defence industry mutual funds are one of the best ways of investing in the evolving Indian defence industry. Given the rising government outlays and demands in the international markets, these mutual funds are giving magnificent returns. Although these funds are specific and involve increased risk levels, one should make informed decisions about investing in these schemes based on one’s risk profile.
By choosing the right defense sector mutual fund, one can make the right investments and tap the growth story in the defense sector in India, courtesy of the latest market trends.
Learn More:
- How to Start Investing in Mutual Funds in India – Step-by-Step Process for Beginners
- Difference Between Mutual Funds and Stocks – Which is Better for Beginners?
- Understanding NAV (Net Asset Value) in Mutual Funds – What It Means and Why It Matters
- Risks Involved in Mutual Fund Investments – Common Risks and How to Manage Them
Disclaimer: The information provided here is for general educational purposes and should not be taken as investment counsel. Investment in stocks is risky and the prices may fluctuate either way. Do your own research or consult a financial advisor prior to investing your capital.
