Top 5 Defense Mutual Funds Deliver Over 30% Returns in 6 Months — Is It Time to Ride the Military Momentum?

As India scales up its defense and aerospace sectors with bold reforms and increased budget allocations, defense-focused mutual funds are emerging as a high-growth opportunity for equity investors. In just the past six months, five defense mutual funds have delivered impressive double-digit returns — all exceeding 30% — outperforming many mainstream equity indices.

While these sectoral funds are classified under the "very high risk" category due to their thematic concentration, they are proving to be a compelling option for investors with high risk tolerance and a long-term horizon.

Let’s dive into the top-performing defense mutual funds in India as of mid-2025, based on 6-month return performance.

🚀 Why Are Defense Mutual Funds Gaining Traction?

Defense mutual funds invest in companies engaged in:

• Defense manufacturing

• Aerospace development

• Strategic and defense-related technologies

With growing government emphasis on ‘Make in India’, defense privatization, and self-reliance, these sectors are witnessing exponential investor interest.

However, due to their thematic nature, these funds are prone to sharp fluctuations during policy changes or market corrections. Despite this, their short-term performance has been stellar.

📊 5 Best-Performing Defense Mutual Funds (6-Month Returns)

1️⃣ Motilal Oswal Nifty India Defense ETF

Return (6 Months): 32.43%

• Launch Date: August 21, 2024

• Assets Under Management (AUM): ₹463 Cr

• Expense Ratio: 0.41%

• Category: Very High Risk

• Benchmark: Nifty India Defense TRI Index

This fund is ideal for long-term investors seeking low-cost exposure to India’s booming defense sector. Minimum investment starts under ₹500.

2️⃣ Groww Nifty India Defense ETF

Return (6 Months): 32.07%

• Launch Date: October 8, 2024

• AUM: ₹183 Cr

• Expense Ratio: 0.43%

• Category: Very High Risk

• Benchmark: Nifty India Defense TRI Index

This is one of the lowest-cost entry points into India’s defense growth story, designed for aggressive investors who want to bet on the sector’s long-term potential.

3️⃣ Motilal Oswal Nifty India Defense Index Fund – Regular Plan

Return (6 Months): 31.92%

• Launch Date: July 3, 2024

• AUM: ₹3,776 Cr

• Expense Ratio: 1.10%

• Category: Very High Risk

• Benchmark: Nifty India Defense TRI Index

With one of the highest AUMs among sectoral funds, this scheme shows strong investor confidence despite its higher expense ratio.

4️⃣ Groww Nifty India Defense ETF FOF – Regular Plan

Return (6 Months): 31.67%

• Launch Date: October 11, 2024

• AUM: ₹61 Cr

• Expense Ratio: 0.63%

• Category: Very High Risk

• Benchmark: Nifty India Defense TRI Index

This fund of funds (FoF) structure allows indirect exposure to defense companies via ETF holdings, suitable for those seeking diversified ETF-based investment.

5️⃣ Aditya Birla Sun Life Nifty India Defense Index Fund – Regular Plan

Return (6 Months): 31.59%

• Launch Date: August 30, 2024

• AUM: ₹664 Cr

• Expense Ratio: 1.06%

• Category: Very High Risk

• Benchmark: Nifty India Defense TRI Index

Though its cost is slightly on the higher side, the fund has demonstrated robust growth since launch, appealing to long-term, aggressive investors.

⚠️ High Risk, High Reward — But With Caution

While returns are impressive, potential investors should understand the inherent risks:

• Sectoral Concentration: All eggs in one basket — if defense underperforms, so does your portfolio.

• Policy Sensitivity: Defense is a highly regulated sector; policy shifts can affect performance rapidly.

• Volatility: Returns can fluctuate sharply during market turbulence or geopolitical changes.

🧠 Who Should Invest?

Defense mutual funds are best suited for:

• Investors with high risk appetite

• Those looking for long-term sectoral growth

• Individuals who understand macroeconomic and policy trends

Not recommended for conservative or short-term investors seeking stable income or capital protection.

📝 Final Takeaway

India’s defense landscape is on the cusp of transformation, and these mutual funds allow retail investors to participate in this growth narrative. If you're bullish on India's security sector, manufacturing push, and defense exports, these funds could offer both diversification and momentum-driven gains.

But remember — high returns come with high volatility. Always consult a SEBI-registered financial advisor before investing in thematic mutual funds.