HDFC Defence Fund has recorded a 26.4% return over the last six months, significantly outperforming peers like Kotak Pioneer and Quant Quantamental funds. With an asset base of Rs 9,724.3 crore, the fund has shown consistent gains, though thematic investments carry higher concentration risks.
HDFC Defence Fund has established itself as the leading performer in the thematic mutual fund category, according to industry data tracked as of early July 2026. The fund delivered a 26.4% return over the past six months, a period marked by strong performance in India’s defence manufacturing sector. This result places the fund well ahead of other thematic schemes, such as the Kotak Pioneer Fund and Quant Quantamental Fund, which reported returns of 6.9% and 6.6%, respectively, during the same timeframe.
Scale and Market Presence
With assets under management (AUM) reaching Rs 9,724.3 crore, HDFC Defence Fund currently holds the largest corpus among the top five schemes in this category that manage more than Rs 1,500 crore. This significant asset base reflects strong investor interest in the defence sector, which has been supported by government policies prioritizing domestic manufacturing and export growth for defence equipment.
Performance Against Benchmarks
The fund’s returns have been notable when compared to its designated benchmark. Over a one-year period, HDFC Defence Fund outperformed its benchmark by 20.2 percentage points, in a period where the benchmark itself saw a negative return of 4.0%. On a three-year horizon, the fund’s performance remains robust, with an annualized return of 42.8%, exceeding the benchmark’s 9.2% return by 33.5 percentage points. In addition to long-term gains, the fund also maintained short-term momentum, delivering an 8.0% return over the last month and 30.1% over the last three months.
Understanding Thematic Fund Risks
While the fund's recent performance is strong, investors should note that thematic funds carry specific risks that differ from diversified equity funds. Because this fund focuses exclusively on companies within the defence and related sectors, it is highly sensitive to policy changes, government spending cycles, and order book execution at the company level. Unlike a broad market index, which spreads risk across various industries, a thematic fund’s performance can fluctuate significantly if the defence sector faces headwinds such as raw material cost pressures or delays in major government contracts.
Investors tracking this fund may look toward future updates on government defence procurement budgets and the order execution progress of the primary companies within the fund's portfolio. Changes in sector-specific regulations or shifts in global defence trade policies remain key monitorables that could influence the fund's future trajectory.