Mutual funds focused on the defence sector have started attracting serious investor interest in India. In the last six months, several defence-themed funds have delivered strong double-digit returns, outperforming peers and broader equity indices. These funds invest in companies directly involved in defence manufacturing, aerospace, and related industries. These funds offer investors a unique opportunity to ride the wave of growth in India’s national security and infrastructure development.
Defence mutual funds fall under the ‘very high risk’ category due to their concentrated exposure to a single theme. These funds are best suited for investors with high risk appetite, a long-term investment horizon, and a belief in the long-term growth of India’s defence sector.
Investors must remember that while the potential for high returns is high, these funds may also see sharp volatility during market corrections or policy changes. That said, for investors looking to diversify their portfolio with a strategic, future-oriented theme, defence mutual funds could be a good bet.
Based on the returns over the past six months, here are the top 5 defence sector mutual funds to consider in 2025.
1. Motilal Oswal Nifty India Defence ETF (32.43%)
Overview of the fund:
Launched on August 21, 2024, Motilal Oswal Nifty India Defence ETF is a very high-risk mutual fund scheme designed to tap into India’s growing defence sector. It tracks the Nifty India Defence TRI index. It has a fund corpus of Rs 463 crore, since it has not completed even 1 year. The fund comes with a low expense ratio of 0.41%, making it cost-effective for long-term investors. Investments can start from as low as Rs 500.
Top holdings:
Bharat Electronics holds the largest weight at 18.63%, followed closely by Hindustan Aeronautics at 18.01% and Solar Industries at 16.08%. Mazagon Dock Shipbuilders and Bharat Dynamics also feature prominently, with portfolio weights of 8.75% and 7.61% respectively. Together, these five companies make up nearly 70% of the ETF’s total assets
2. Groww Nifty India Defence ETF (32.07%)
Overview:
Groww Nifty India Defence ETF was launched by Groww Mutual Fund on October 8, 2024. It tracks the Nifty India Defence TRI index and falls under the ‘Very High’ risk category, as per the Riskometer. As of May 31, 2025, the fund manages assets worth Rs 183 crore with an expense ratio of 0.43%, making it a moderately low-cost option for investors looking to tap into the country’s growing defence industry.
Top holdings:
Groww Nifty India Defence ETF has a concentrated portfolio with its top holdings focused on key players in India’s defence sector. Bharat Electronics holds the highest weight at 18.63%, followed by Hindustan Aeronautics at 18.01% and Solar Industries at 16.09%. Mazagon Dock and Bharat Dynamics make up 8.75% and 7.61% of the portfolio, respectively. These top five stocks together account for a major portion of the fund.
Also read: Best sectoral mutual funds to invest in 2025
3. Motilal Oswal Nifty India Defence Index Fund – Regular Plan (31.92%)
Overview:
The fund is an open-ended scheme launched by Motilal Oswal Mutual Fund on July 3, 2024. Since its inception, the fund has generated a return of 13.27%, tracking the Nifty India Defence TRI index. It falls under the ‘Very High’ risk category. As of May 31, 2025, the fund has amassed assets worth Rs 3,776 crore, showcasing strong investor interest. With an expense ratio of 1.10%, it is relatively costlier compared to peers.
Top holdings:
Its top holdings include Bharat Electronics (18.61%), Hindustan Aeronautics (18.00%), and Solar Industries (16.07%), followed by Mazagon Dock (8.74%) and Bharat Dynamics (7.61%). These five companies together account for nearly 69% of the total portfolio.
4. Groww Nifty India Defence ETF FoF – Regular Plan (31.67%)
Overview:
The fund is an open-ended scheme launched by Groww Mutual Fund on October 11, 2024. Since its launch, the fund has delivered a strong return of 28.41%, tracking the performance of the Nifty India Defence TRI index. Categorised under the ‘Very High’ risk level, the fund targets investors looking for growth through exposure to India’s defence sector. As of May 31, 2025, it manages assets worth Rs 61 crore and has an expense ratio of 0.63%.
Top holdings:
The FoF holds 99.89% in Groww Nifty India Defence ETF-G.
Also read: Best Motilal Oswal funds: These schemes top their categories with up to 31 pc 1-year returns
5. Aditya Birla Sun Life Nifty India Defence Index Fund – Regular Plan (31.59%)
Overview:
The fund is an open-ended scheme launched on August 30, 2024, by Aditya Birla Sun Life Mutual Fund. Since its inception, the fund has generated a return of 23.89%. It tracks the Nifty India Defence TRI index. It falls under the ‘Very High’ risk category, suitable for aggressive investors with a long-term horizon. As of May 31, 2025, the fund has assets under management of Rs 664 crore and an expense ratio of 1.06%, reflecting strong interest despite relatively higher costs.
Top holdings:
The Aditya Birla Sun Life Nifty India Defence Index Fund – Regular Plan features a sharply focused defence-oriented holdings. As of May 30, 2025, its top five investments are Bharat Electronics (18.61%), Hindustan Aeronautics (18.00%), Solar Industries (16.06%), Mazagon Dock Shipbuilders (8.74%), and Bharat Dynamics (7.61%). Together, these core positions account for approximately 69% of the total portfolio.
(Data: Value Research)
Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.
