Defence Stocks, Mutual Funds Fire Up: Should Investors Focus On Current Rally?

As geopolitical tensions emergence and nationalist defence takes centre stage, defence stocks person softly delivered blockbuster gains successful 2025. The BSE Defence Index has surged astir 60% complete nan past year, acold outpacing nan Sensex’s 17% return, according to information from ACE Equity arsenic of April-end.

Frontline defence companies for illustration Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL), and Mazagon Dock Shipbuilders person led nan charge. HAL’s banal climbed astir 55% successful a year, supported by beardown request for its ray combat helicopters and a robust bid book worthy complete ₹80,000 crore. BEL clocked a 45% return, powered by rising orders for radar systems and physics warfare technologies. Meanwhile, Mazagon Dock saw a staggering 100% surge successful its banal price, buoyed by upcoming warship and submarine projects and generous dividend payouts.

Smaller players are besides making waves. Paras Defence and Space Technologies Ltd jumped 7.18% to adjacent astatine Rs 1,458.45. On May 9, amid heightened India-Pakistan separator tensions, shares of ideaForge Technologies soared 14%, while Zen Technologies deed a 5% precocious circuit.

Year-to-date, Bharat Dynamics has gained 37%, Paras Defence 41.65%, HAL 8%, and BEL 7.76%, underscoring increasing investor liking successful India’s defence manufacturing space.

Defence communal funds

Investors are focusing connected defence communal costs and defences successful nan Indian markets. Defence assemblage communal costs are fundamentally thematic communal costs that are designed to put successful stocks that align pinch a predetermined theme. 

Defence communal costs are composed of a portfolio of stocks from companies that are chiefly engaged successful nan research, development, manufacture, aliases waste of products and services related to defence and subject operations.  

Thematic communal costs focused connected India’s defence assemblage person delivered beardown returns successful 2024, importantly outperforming broader marketplace indices for illustration nan BSE 500 TRI. Among them, nan Groww Nifty India Defence ETF FoF (Direct) has posted nan highest year-to-date (YTD) return of 9.28%, followed intimately by ABSL Nifty India Defence Index Fund (Direct) astatine 9.24%, and Motilal Oswal Nifty India Defence Index Fund (Regular) astatine 9.21%.

On a 1-month basis, nan Groww money again leads pinch 16.45%, compared to 16.04% for ABSL and 16.00% for Motilal Oswal. Over 3 months, each 3 costs show awesome maturation betwixt 19.35% and 19.39%, indicating accordant short-term momentum successful nan defence sector.

In contrast, nan BSE 500 TRI has underperformed crossed each timeframes—registering a YTD diminution of 2.87% and antagonistic returns complete 6 months (-4.11%).

While each 3 defence costs way nan Nifty India Defence Index, offering akin exposure, nan Groww money somewhat edges up successful short-term performance. However, investors should statement that these are caller costs pinch nary 1-year aliases semipermanent way record, and capacity could beryllium volatile owed to nan sector’s cyclical nature.

Source: Value Research
 

Published on: May 10, 2025 12:55 PM IST