HDFC Defence Fund: Portfolio with 3.9% large cap, Fund with 44.5% absolute returns in last one year

The HDFC Defence Fund since June 2023 boasts a concentrated portfolio of 22 stocks, reflecting a focused investment strategy aimed at capitalizing on the growth potential within the defence sector. Compared to the category average, which consists of 38.99 stocks, the fund maintains a more streamlined selection of assets, allowing for greater emphasis on high-conviction picks.

The fund’s top 5 stocks command a significant portion of the portfolio, comprising 59.46% of total holdings. This concentration underscores the fund manager’s conviction in these key positions, which are strategically selected to drive portfolio performance.

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In terms of sector allocation, the fund exhibits a pronounced tilt towards the aerospace and defence industries, with the top 3 sectors comprising 78.71% of total holdings. This sectoral concentration aligns with the fund’s thematic focus on defence-related opportunities, allowing investors to gain exposure to a niche segment of the market.

Investor Suitability

This fund is designed for experienced investors who understand macroeconomic trends and are willing to take on calculated risks for potentially higher returns. Its focus on selective investments in the defence sector makes it suitable for those who can identify niche opportunities in the market. However, investors should be aware of the volatility associated with thematic investments and be prepared for fluctuations in portfolio value, especially during market downturns.

HDFC Defence Fund: Performance Overview

The HDFC Defence Fund has delivered a remarkable absolute return of 44.58% over the past year, significantly surpassing the category average return of 21.67%. Since its inception on June 2, 2023, the fund has exhibited exceptional growth, yielding an impressive absolute return of 120.73%. These figures underscore the fund’s consistent ability to generate substantial returns for investors, making it a standout performer within its category.

HDFC Defence Fund: Performance Returns

Period Invested for ₹10000 Invested on Latest Value Absolute Returns Annualised Returns Category Avg Rank within Category
1 Week 17-May-24 11059.30 10.59% 4.89% 2/7
1 Month 24-Apr-24 11753.70 17.54% 9.32% 2/7
3 Month 23-Feb-24 13602.00 36.02% 17.71% 2/7
6 Month 24-Nov-23 16668.70 66.69% 35.98% 2/7

HDFC Defence Fund: Category Comparison

  • Compared to the category average, the HDFC Defence Fund maintains a distinct profile in terms of market capitalization and sectoral exposure. While the average market capitalization of stocks in the category stands at ₹86,878.45 crore, the fund’s average market capitalization is notably lower at ₹7,701.20 crore. 
  • This divergence suggests that the fund exhibits a bias towards smaller companies, potentially offering investors access to high-growth opportunities within the defence sector’s mid- and small-cap segments.
  • While the category average allocates 42.23% to large-cap stocks, the HDFC Defense Fund has a minimal allocation of 3.91%. signalling a preference for companies with strong growth potential and scalability within the defence sector.

HDFC Defence Fund: Stock Holdings

  • Hindustan Aeronautics Ltd.
  • Bharat Electronics Ltd.
  •  Premier Explosives Ltd.

These holdings underscore the fund’s emphasis on established players and growth-oriented companies within the aerospace, defence, and related sectors, positioning it favourably to capitalize on sector-specific opportunities.

Sectoral and Thematic Allocation

The HDFC Defence Fund is strategically positioned, with 96.48% of its assets dedicated to domestic equities, showcasing a clear thematic focus on the defense sector. Among these allocations, 3.91% is earmarked for Large Cap stocks, reflecting stability and established market presence, while 18.56% is directed towards Mid Cap stocks, offering a balance of growth potential and risk. The largest allocation, constituting 31.08%, is dedicated to Small Cap stocks, signaling a keen interest in tapping into emerging opportunities within the defense industry’s dynamic landscape.

HDFC Defence Fund: Portfolio Composition

The fund’s equity-heavy portfolio comprises 96.48% of its total assets, reflecting a strong conviction in the growth prospects of the defence sector. Notably, the absence of debt allocations underscores the fund manager’s commitment to capitalizing on equity market opportunities.

Within the equity segment, the fund maintains a diverse portfolio of 22 stocks, with a notable emphasis on the Aerospace & Defense sectors. 

Key holdings such as Hindustan Aeronautics Ltd. and Bharat Electronics Ltd. underscore the fund’s strategic focus on established players within the defence industry, positioning it favourably to capitalize on sector-specific growth opportunities.

Disclaimer: The information provided in this article is for educational and informational purposes only. It should not be considered as investment advice or a recommendation to invest in any particular mutual fund or asset class. Past performance is not indicative of future results, and investors should conduct their own research and consult with a financial advisor before making any investment decisions. Investing in mutual funds involves risks, including the possible loss of principal invested.