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Economic Times
28-05-2025
- Business
- Economic Times
Defence sector based mutual funds rally up to 60% in 3 months. Will the momentum continue?
Defence sector based mutual funds have rallied upto 60% in the last three months. There are around six funds in the category including active and passive and gave an average return of 57.70% in the same period. Three schemes in the category gave over 60% return. Motilal Oswal Nifty India Defence ETF offered the highest return of around 60.49% in the last three months, followed by Motilal Oswal Nifty India Defence Index Fund which gave 60.23% return in the same period. Also Read | Defence ETFs gain 17% in one week. Should you add to your portfolio? Groww Nifty India Defence ETF and Aditya Birla SL Nifty India Defence Index Fund gave 60.12% and 59.96% returns respectively in the similar time period. Groww Nifty India Defence ETF FOF gave 59.45% return in the mentioned time period. HDFC Defence Fund, the only active fund based on the defence sector, delivered 45.93% return in the mentioned period. Experts attribute this surge to a combination of strong earnings delivery by the sector constituents, policy momentum with increased capital allocation by the Indian government and trigger coming from actual use case of India's Defence Capability in recent India-Pakistan faceoff at borders.'Key holdings in defence index funds reported strong earnings growth. The Indian defence budget allocation for FY25 has maintained a sharp focus on indigenization. Capital outlay of Rs 1.72 lakh crore continues to support new orders. Defence exports reached an all-time high of Rs 21,083 crore in FY24 (up 12% YoY), reflecting rising global demand for Indian defense manufacturing. This surge in earnings, coupled with a policy push and a favorable geopolitical backdrop, led to substantial price rerating and fund outperformance,' said Atul Shinghal, Founder and CEO, Scripbox. In addition to these factors, another expert adds that Defence funds have benefited from the recent surge in prices of defence stocks. Defence stocks have been on the rise in recent months after they were hit badly during the sell-off earlier this year. 'Many countries around the world, including India are ramping up their military capabilities, leading to increased defence spending. In India, this trend was further strengthened post the Operation Sindoor, as the Indian government plans to further improve our defence capabilities,' said Nilesh D Naik, Head of Business – Investments, the last six months, defence based passive funds returned 34% with Motilal Oswal Nifty India Defence ETF being the topper as the fund delivered 34.22% return in the last six months, followed by Motilal Oswal Nifty India Defence Index Fund which gained 33.73% in the same Nifty India Defence ETF FOF gave 33.35% in the last six months. HDFC Defence Fund, the only active fund based on this sector, gave 15.86% return in the same period. Also Read | HDFC Defence Fund increases stake in HAL, Solar Industries, and 4 other stocks in April Despite seeing the historical stellar performance by these funds, experts don't recommend investing in these sectoral funds. Shinghal of Scripbox mentions that despite strong sector fundamentals, current valuations are stretched as the trailing P/E ratio of the Motilal Oswal Nifty India Defense Index stands at a steep 61.35x, while the P/B ratio is 13.22x—significantly higher than broader market averages. which in turn indicates that the future growth might be already priced further adds that the Sharpe Ratio is negative (-0.07), indicating poor risk-adjusted return over recent volatility, despite high absolute returns and the index has 77.5% exposure to mid and small caps, which increases vulnerability to sharp corrections during risk-off sentiment willing to allocate or have existing investments in these funds can follow the strategy Shinghal shared. He mentioned that existing investors should hold and consider profit booking in a staggered manner, new investors should avoid fresh lump-sum allocations and tactical SIPs may be considered only on 10–15% corrections, and lastly the total allocation to defence sector should be between 2-4% and should not exceed 4% of total equity the other hand, Naik advices that thematic funds such as this are typically meant for seasoned investors who have their core portfolio in place and who want to take a tactical bet based on their views on a specific sector or theme. 'With recent rally in defence stocks, many of them have now recovered significantly and are trading at close to their all time highs. While the long term defence sector story seems strong, investors should be extremely cautious while investing in such funds post this rally, given the current valuations,' he earlier analysed that in a week's time, defence sector based ETFs have gained upto 17% in one week's time. The focus on defence stocks came after reports that the Modi government has called a meeting with defence makers post the recent India-Pakistan faceoff at the stellar performance of defence funds, Shinghal comments on the outlook for the sector and mentions that while India's long-term defense growth story is intact, current valuations do not offer a favorable risk-reward for fresh allocations and investors are advised to retain moderate exposure (up to 4%), book profits where returns have exceeded expectations, and re-enter during valuation corrections or policy-driven should always choose a scheme based on risk appetite, investment horizon, and goals. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@ alongwith your age, risk profile, and Twitter handle.
Mint
26-05-2025
- Business
- Mint
Tradition Rewired: Why millennial and Gen Z are keeping the past alive—On their own terms
You might think that India's younger generation is rewriting its own rules in a time of stock market apps, cryptocurrency and FIRE goals. But, if you look closely, you'll realise that the old cultural norms continue to underscore their investment and spending choices. Expectations of deep-rooted customs, such as investing in gold and spending on weddings, financial dependence on parents at the time of buying large assets, still shape the financial behaviours of millennials and Gen Z despite India's economy being rapidly modernised. The pressure to conform to social expectations has not disappeared, it has changed. It is now only dressed up with expensive wedding costs, diamond-inlayed "gifts" and gorgeous lehengas. "I believe we must follow the middle path from Buddha's teaching that is diversifying the spending spectrum in the latest tech to get the benefits out of it, while also investing in gold which has traditionally proved to be a proverbial wooden log in a flood. We should not put all our eggs in one basket. Therefore, if someone is smitten by the bug of consumption, s/he will be vulnerable during the rough weather. On the other hand, if we follow into the footsteps of our elders, we will be insulated from the new age, which is shaping the future goal of India being a developed nation," says Mansi Tirthani, UPSC aspirant. Between 1991-92 and 2019-20, India's per capita income jumped from ₹ 6,835 to ₹ 1,34,186—a CAGR of 11.2%. This unprecedented rise in income has catapulted many families into the upper middle class and beyond. But with great wealth came... not great savings, but bigger, fatter weddings'. 'Despite the increased quantum of wealth, the old mindset, which is rooted in centuries-old cultural norms, continues to influence financial decisions, even among millennials and Gen Z,' says Atul Shinghal, Founder and CEO of Scripbox. This 'mindset' isn't limited to the formal exchange of dowry—which, while illegal, still persists in subtler forms—but spills over into how Indian families view marriage and status. Wedding gold remains non-negotiable. Lavish functions aren't just celebrations—they're social currency. And while financial planning is trending, it often takes a backseat to fulfilling these deep-seated expectations. Concentration of wealth is one particular challenge facing today's youth. One child may inherit from both families in a large number of single-parent households. The wealth of four families land in two individuals by inheritance if that child marries another only child. Despite sounding like a windfall, it can be a quite burden to uphold the lifestyle that wealth actually implies. Often it results in spending too much, saving too little, and internal family conflict about tradition versus financial independence. In India, it is very common that parents will contribute financially for important life events such as weddings, down payments, and possibly business aspirations. While this financial cushion is great to have, it also prevents individuals from becoming financially independent. While Gen Z and millennials will proclaim that they are "self-made", many of them are still relying on their parents' savings when the larger bills come. This financial reliance, all under the auspice of familial love, could constructively help (or hurt) personal financial goals. The younger generation in India is fueling the growing FIRE (Financially, Independent, and Retire Early) movement which seems to push against some of the cultural norms which results in cognitive dissonance: Should I spend money on a gold set for my sister's wedding or save for my future? Cultural values aren't always negative. Things like wedding gifts, family support, and community celebrations are some of the things that enrich and enliven Indian experiences. However, we must reconsider the cultural values of long-standing practices when they lead to financial hardship, increase in debt, or delay the creation of wealth. Generation Z and millennials in India are at crossroads. They have more money, education, and earning power than any previous generation. But, they also have the weight of expectations from centuries of regimes. Instead of outright rejection of tradition, the present challenge is to intentionally and sustainably disrupt it. It's time to scrap guilt-driven gifting for inter-generational financial success. Moving from status to stability and from social signalling to careful savings. Old habits die hard—especially when they're wrapped in silk and sealed with 24-carat gold. But India's young earners have the power to redefine legacy—not just in terms of wealth, but also in wisdom.
