HDFC Mutual Fund launches first-ever defence fund: All about it

Select defence stocks on Dalal Street have managed to deliver multibagger return to investors in the past few years. Take this: players like Bharat Dynamics, Bharat Electronics and Hindustan Aeronautics have gained somewhere between 300-500 per cent in the past three years. With an objective to provide a basket of defence stocks to investors, HDFC Asset Management on May 16 announced the launch of the HDFC Defence Fund, which plans to invest in defence and allied sector companies.

“Defence as a sector, sees a constant need to modernize its platforms due to its strategic relevance for the country and technological advancements. Through initiatives like Make in India, the government policies remain conducive to the growth of defence sector in the country,” HDFC Asset Management said.

Stock picking strategy

The asset manager, in a release, said that the mutual fund will follow a bottom-up approach of portfolio construction within the defence ecosystem.

“HDFC Defence Fund will seek to invest in companies with good quality management with demonstrated track record and aim to achieve diversification by following a multi-cap strategy. The fund’s focus would be on growth and quality at reasonable valuations by investing across large, mid and small cap stocks,” the money manager said.

NFO date

The new fund offer (NFO) will open for subscription on May 19, 2023, and closes on June 2, 2023.

Navneet Munot, Managing Director and Chief Executive Officer, HDFC Asset Management Company Limited said: “Defence readiness is critical to peace, prosperity and social well-being. The government has also been pushing for Aatmanirbharta in defence sector. With HDFC Defence Fund, the first of its kind fund investing in companies in the defence and allied industries, we are presenting investors an opportunity to participate in structural growth potential of India's defence sector “

The scheme will be managed by Abhishek Poddar, Fund Manager, Equity and Senior Equity Analyst, Dealing & Investments, HDFC Asset Management Company Limited who has over 17 years of experience in equity research, investment banking and corporate finance.  Commenting on HDFC Defence Fund, Abhishek Poddar said: “In a multipolar world, defence expenditure globally is set to increase as countries enhance their defence capabilities. Self-reliance in defence led by strong R&D focus and enhancement of manufacturing capabilities creates an opportunity for Indian companies to serve the domestic market as well as tap the large export potential. This could offer a multi-decadal investment opportunity.”

More about the fund

HDFC Defence Fund is an open-ended equity scheme investing in defence & allied sector companies. The scheme will invest at least 80 per cent of its net assets in defence and allied sector companies. Defence & allied sector stocks include:

(i) Stocks forming part of certain eligible ‘basic industries’ based on AMFI Industry classification including aerospace and defence, explosives, shipbuilding and allied Services as amended from time to time; or

(ii) Stocks from any other defence and allied sectors as per benchmark’s criteria; or

(iii) Stocks present on SIDM (Society of Indian Defence Manufacturers) list; and which obtain at least 10 per cent of revenue from the defence segment.