Should you Invest in 

Motilal Oswal Nifty India Defence Index Fund 

 

NFO : Open Date: It is open now

NFO : End Date: 24^th June 2024

Motilal Oswal Nifty India Defence Index Fund: MOTILAL OSWAL ASSET MANAGEMENT COMPANY has come up with new Fund offer  namely 

Motilal Oswal Nifty India Defence Index Fund

NFO will close on 24 June 2024

In the recent past the shares of the aerospace & defense companies has witnessed very bullish  rally in the markets.

PM Modi-led government at the Centre is focused on self-reliance (Atmanirbhar Bharat) in defence which is driving the sector`s meteoric rise. Initiatives like import curbs on defence equipment and a push for exports are creating opportunities for domestic companies. This is further supported by increasing foreign direct investments (FDI) in the sector.

Defence Minister Sri  Rajnath Singh  also said that  the government has a target to export over Rs 50,000 crore worth of defence equipment by 2028-2029. The fiscal year 2023–2024 saw a record-breaking Rs 21,083 crore in defense exports..

Hindustan Aeronautics Ltd, NSE: HAL, share price advanced 1.73 per cent in Friday's trading session to settled at Rs 5,188 per share on the National Stock Exchange (NSE). Bharat Electronics share price jumped to Rs 309.70 a piece, up by 2.92 per cent on Friday. Mazagon Dock was up by a whopping 14.02 per cent to end the session at Rs 3,865 apiece. A similar rally was witnessed in the shares of other aerospace & defence companies, including Solar Industries, Bharat Dynamics, Cochin Shipyard, BEML Ltd among others in the index.

Motilal Oswal Nifty India Defence Index Fund: Should you Invest?

Defence can be a lucrative category to invest. India’s imports in particular segments have decreased noticeably. On the other hand, the nation has also seen an upword  in exporting armaments to certain neighboring countries. These developments, backed by sectoral prospects, make the sector a lucrative investment option.

The fund gives investors an opportunity to profit from the anticipated expansion of the Indian defense industry, which is expected to reach $100–120 billion in the next six years. The fund is designed to track 15 of the top defense manufacturing and services businesses from the Nifty India Defence Index. As of May 31, 2024, the index had produced impressive returns, with a 1-year  177.67 %   and 5-year CAGR of 55.52%

 

Top Companies forming part of Defense Sector

 

Astra Microwave Products Ltd.

Bharat Dynamics Ltd.

Bharat Electronics Ltd.

Cochin Shipyard Ltd.

DCX Systems Ltd.

Data Patterns (India) Ltd.

Garden Reach Shipbuilders & Engineers Ltd.

Hindustan Aeronautics Ltd.

Ideaforge Technology Ltd.

MTAR Technologies Ltd.

Mazagoan Dock Shipbuilders Ltd.

Mishra Dhatu Nigam Ltd.

Paras Defence and Space Technologies Ltd.

Solar Industries India Ltd.

Zen Technologies Ltd.

 

 

PROS & CONS of Investing in Defence Sector

 

Pros 

Diversification within a sector: Investing in a mutual fund tracking the Nifty defence Index allows investors to gain exposure to a variety of companies within the defence sector. This can help spread out risk while still focusing on a specific industry.

Stable investment in a niche market: The defence sector is often considered stable due to consistent government spending and long-term contracts. This can make mutual funds tracking the defence index a less volatile investment compared to other sectors.

 

Potential for growth: With increasing global tensions and a focus on national security, the defence sector may see growth. Investing in a mutual fund tracking the Nifty defence Index could capitalise on this potential.

 

Passive management: Index funds are typically passively managed, which means lower management fees for investors. This cost-saving can be particularly beneficial over the long term.

 

Cons 

Sector-specific risks: While diversification within the defence sector is possible, investors are still exposed to risks specific to this industry, such as changes in government policy or defence spending.

 

INVESTORS SHOULD UNDERSTAND THAT THERE ARE NOT MUCH COMPANIES IN THIS SECTOR HENCE INVESTMENT IS LIMITED TO IN FEW STOCKS ONLY

 

 PAST PERFORMANCE :

 

Only Fund to track  record of  past performance is HDFC DEFENCE FUND   which was launched in June 2023 . Rupees 1 Lakh invested in this fund in June 2023 is worth 2,20,000 today means more than double in one year.

 

Hence it is expected that this fund will give  similar return in coming years