HDFC Defence Fund to halt new SIP registrations from July 22
The HDFC Defence Fund focuses on companies operating in India's defense sector, includes 29 listed companies
New Delhi: During a bullish stock market phase, several mutual fund schemes have delivered impressive performances. Among them, HDFC Defence Fund stands out with its remarkable returns, surprising investors who entered the scheme in June 2023. Their investments have nearly tripled in value since then.
However, HDFC Mutual Fund Company has announced that it will not accept new investments in this scheme after July 22. This decision comes despite the successful launch of the fund’s New Fund Offer (NFO) in May 2023. This garnered substantial investor support and closed just two days before the cutoff date, raising ₹1000 crore.
What is HDFC Defence Fund?
The HDFC Defence Fund focuses on companies operating in India’s defence sector, which includes 29 listed companies. The fund currently includes shares of 21 defence companies, with significant investments in top three defence companies which include HAL, BEL, and Astraa Microwave Products. The remaining 18 stocks constitute about 50% of the portfolio, some of which are trading near their all-time highs.
Reflecting on its performance, HDFC Defence Fund has delivered impressive returns since its inception. Largely benefiting from the recent surge in defense stocks. Investors who participated in the NFO with ₹1 lakh have seen their investment grow to ₹2,48,620. Additionally, those who started a SIP of ₹10,000 per month a year ago have seen their total investment of ₹1,20,000 rise to ₹2,11,140. Equating to an annual return of 164.69%.
The decision by HDFC Mutual Fund to halt new investments in the Defence Fund raises questions. According to Nisha Sanghavi, Co-Founder & CFP at ProMore Fintech, this move may be influenced by recent government initiatives to boost indigenous defense manufacturing under the Make in India campaign. The increased allocation of ₹1.72 lakh crore for the defense sector in the interim budget has fueled a strong rally in defence stocks over the past year.
While the restriction on new investments is temporary, HDFC Mutual Fund has assured existing investors that registered SIPs will continue uninterrupted. This decision aims to mitigate risks associated with potential downturns in defence stocks. If conditions improve, the fund may lift the restriction, allowing new investments once again.
Existing investors and those participating through SIPs need not worry. As HDFC has clarified that the current policies will not affect NAV redemptions, switch-outs, or STP-outs. This assurance provides stability amidst market uncertainties, ensuring continuity for investors in HDFC Defence Fund.