{"id":6241,"date":"2026-01-16T12:46:28","date_gmt":"2026-01-16T12:46:28","guid":{"rendered":"https:\/\/www.paytmmoney.com\/blog\/?p=6241"},"modified":"2026-02-19T09:07:14","modified_gmt":"2026-02-19T09:07:14","slug":"defence-etfs-and-mutual-funds-capitalising-on-indias-defence-transformation","status":"publish","type":"post","link":"https:\/\/www.paytmmoney.com\/blog\/defence-etfs-and-mutual-funds-capitalising-on-indias-defence-transformation\/","title":{"rendered":"Defence ETFs and Mutual Funds: Capitalising on India\u2019s Defence Transformation"},"content":{"rendered":"

India\u2019s defence sector is no longer operating in the background of the economy. It has moved firmly into the spotlight, backed by strong policy intent and rising budgetary support. The Union Budget for FY26 has earmarked an outlay of \u20b96,81,000 crore, or about US$ 78.7 billion, for defence spending, marking a 9.5 percent increase over the FY25 allocation. This renewed commitment signals the government\u2019s focus on strengthening domestic capabilities, boosting self-reliance, and expanding defence manufacturing.<\/span><\/p>\n

For investors, this steady rise in defence spending is translating into a compelling long-term opportunity. Defence ETFs and defence mutual funds are increasingly being tracked as structured ways to participate in India\u2019s defence growth story without the complexity of selecting individual stocks. With policy support, rising capital expenditure, and growing market participation, the defence theme is fast emerging as a key segment within India\u2019s equity landscape.<\/span><\/p>\n

(<\/span><\/i>Source:<\/i><\/b> IBEF<\/span><\/i><\/a>)<\/span><\/i><\/span><\/p>\n

What Is a Defence ETF?<\/b><\/h2>\n

A Defence <\/span>ETF<\/span><\/a> is a thematic exchange traded fund that invests in companies engaged in defence and aerospace manufacturing, systems development, and allied services. These funds track the Nifty India Defence Index, which reflects the performance of listed companies that are closely linked to India\u2019s defence ecosystem.<\/span><\/p>\n

Unlike actively managed funds, Defence ETFs follow a passive investment approach. They aim to mirror the returns of the underlying index, offering investors diversified exposure to the defence sector through a single listed instrument.<\/span><\/p>\n

Top Defence Mutual Funds and ETFs for 2026<\/b><\/h2>\n
\n\n\n\n\n\n\n\n\n
Investment Name<\/th>\nType<\/th>\n1-Year Return (Approx.)<\/th>\nLaunch Date<\/th>\nExpense Ratio (Direct)<\/th>\n<\/tr>\n<\/thead>\n
Motilal Oswal Nifty India Defence ETF<\/a><\/td>\nETF<\/td>\n33%<\/td>\n2024<\/td>\n0.41%<\/td>\n<\/tr>\n
Groww Nifty India Defence ETF<\/a><\/td>\nETF<\/td>\n32%<\/td>\n2024<\/td>\n0.43%<\/td>\n<\/tr>\n
Aditya Birla Sun Life Defence Index Fund<\/a><\/td>\nIndex Fund<\/td>\n23%<\/td>\n2024<\/td>\n0.33%<\/td>\n<\/tr>\n
HDFC Defence Fund<\/a><\/td>\nActive Mutual Fund<\/td>\n18%<\/td>\n2024<\/td>\n0.80%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

(<\/span><\/i>Source:<\/i><\/b> Business Standard, Moneycontrol, AMFI Data as of Jan 14, 2025)<\/span><\/i><\/span><\/p>\n

The data shows that Defence ETFs have delivered strong short-term returns, while defence mutual funds offer varying outcomes depending on management style and portfolio strategy.<\/span><\/p>\n

How Stocks Are Selected in Defence ETFs<\/b><\/h2>\n

The <\/span>Nifty India Defence Index<\/span><\/a> follows a clearly defined selection methodology to ensure focused exposure to the sector.<\/span><\/p>\n

Key elements of the index methodology include:<\/span><\/p>\n