The Indian defense sector has experienced significant growth in recent years attracting investors seeking to capitalize on its expansion. The Motilal Oswal Nifty India Defence Index Fund offers an opportunity to invest in this burgeoning sector by tracking the Nifty India Defence Total Return Index.
Understanding the Motilal Oswal Nifty India Defence Index Fund
Fund Objective
This fund aims to provide returns that correspond to the total returns of the securities represented by the Nifty India Defence Total Return Index subject to tracking error. It offers investors exposure to companies engaged in defense and related activities within India.
Fund Details
- Launch Date: July 3 2024
- Fund Category: Equity: Thematic
- Fund Size: ₹1970.40 crore (as of January 31 2025)
- Expense Ratio: 1.06% (Regular Plan)
- Minimum Investment: ₹500
- Exit Load: 1% if redeemed within 15 days
Performance Overview
Since its launch the fund has faced challenges with trailing returns over different periods showing negative performance. For instance the fund’s returns since inception stand at -27.17%. However it’s essential to note that thematic funds like this are subject to higher volatility and may require a longer investment horizon to realize potential gains.
Portfolio Composition
The fund invests predominantly in domestic equities with allocations across various market capitalizations:
- Mid Cap Stocks: 21.39%
- Small Cap Stocks: 28.3%
This diversified approach allows investors to gain exposure to different segments within the defense sector.
Expense Ratio and Exit Load
The expense ratio for the Regular Plan is 1.06% which is below the category average of 1.63%. Additionally an exit load of 1% applies if units are redeemed within 15 days encouraging investors to maintain a longer-term perspective.
Tax Implications
Investors should be aware of the tax implications associated with this fund:
- Short-Term Capital Gains (STCG): Gains are taxed at 15% if units are redeemed within one year of investment.
- Long-Term Capital Gains (LTCG): For units redeemed after one year gains up to ₹1 lakh in a financial year are exempt from tax. Gains exceeding ₹1 lakh are taxed at 10%.
Recent Trends in the Indian Defense Sector
The Indian defense sector has witnessed a surge in investments driven by the government’s focus on domestic arms production. The sector index has climbed nearly 56% over the past year with expectations of defense production growing up to 20% annually until the end of the decade.
The Motilal Oswal Nifty India Defence Index Fund provides investors with a targeted approach to participate in the growth of India’s defense sector. While the fund has faced initial performance challenges its focus on a rapidly expanding industry offers potential for long-term gains. Investors should consider their risk tolerance and investment horizon before committing to this thematic fund.
