The defense sector is expanding rapidly, particularly in nations like India, where the government is investing more to upgrade its military and develop its own defense hardware. This has caused defense sector mutual funds and ETFs (Exchange-Traded Funds) to become a favorite among investors. These are investment vehicles that allow you to invest your money in companies that produce equipment such as military equipment, planes, or cybersecurity software. With global tensions and security in mind in 2025, these funds are a great option for anyone who would like to see their money grow in the future.
In this blog post, we’ll look at the 7 best defense sector mutual funds and ETFs for 2025. We’ll explain each one in simple terms, covering what they invest in, their top companies, costs, and how well they’ve done. You’ll also find a comparison table to see the differences easily, plus a conclusion and an FAQ section to answer your questions.
7 Best Defence Sector Mutual Funds & ETFs for 2025
1. HDFC Defence Fund
The HDFC Defence Fund is a unique mutual fund in India that was introduced in June 2023. It was the first such fund that would invest only in defense firms. This fund will help your money increase over the long run by investing in shares of companies related to defense, such as those producing weapons or defense technology. The fund manager selects the companies in a thorough research manner, so it’s an “actively managed” fund.
It has an investment in 22 companies, and prominent names such as Bharat Electronics and Hindustan Aeronautics feature at the top of this list. They are large Indian companies that produce defense machinery. The fund distributes its funds in large, medium, and small companies—approximately 46% in large ones, 35% in small ones, and 14% in medium ones. The fee to operate this fund, also known as the expense ratio, is fair, so more of your money remains invested. The fund has performed well since it began, due to the increasing defense budget of India. If you’d like to invest in a fund with a focus on defense that has a good beginning, this might be a good choice.
2. Motilal Oswal Nifty India Defence ETF
The Motilal Oswal Nifty India Defence ETF is an Exchange-Traded Fund that tracks the Nifty India Defence TRI index. It was launched on August 21, 2024, and it’s a “passive” fund, which means it replicates the index rather than having a manager select individual stocks. This ETF provides you with an easy way to invest in India’s best defense companies.
Its largest five holdings constitute around 70% of the fund. Some of the major holdings in this ETF are Bharat Electronics (18.63%), Hindustan Aeronautics (18.01%), Solar Industries (16.08%), Mazagon Dock Shipbuilders (8.75%), and Bharat Dynamics (7.61%). The cost ratio is low at 0.41%, so it’s inexpensive. As soon as it started, it’s returned good amounts because the defense industry is hot now. A cool feature of this ETF is that you can sell and buy it on the stock market like an ordinary stock. If you prefer low-expense options and wish to invest in India’s defense expansion, this ETF is not a bad idea.
Also Read: 7 Best Mutual Funds in India
3. Groww Nifty India Defence ETF
The Groww Nifty India Defence ETF, which started trading on October 8, 2024, also follows the Nifty India Defence TRI index. Similar to the Motilal Oswal ETF, it’s a passive fund that replicates India’s leading defense companies’ performance. It’s a new fund but has already made waves.
Its strongest holdings are, like the Motilal Oswal ETF, Bharat Electronics (18.63%), Hindustan Aeronautics (18.01%), Solar Industries (16.09%), Mazagon Dock (8.75%), and Bharat Dynamics (7.61%). The cost ratio is marginally higher at 0.43%, but still reasonable. Since its inception, it’s done quite well, benefiting from the trend of growth in the defense sector. What sets it apart is that it’s part of a fund-of-funds structure, which may interest some investors. If you’re looking for a simple, low-cost way to invest in India’s defense industry, this ETF is a solid choice.
4. Aditya Birla Sun Life Nifty India Defence Index Fund
The Aditya Birla Sun Life Nifty India Defence Index Fund is an open-ended fund with an inaugural date of August 30, 2024. The fund is intended to track the returns of the Nifty India Defence TRI index, thus another passive fund choice. It’s suitable for individuals who don’t want much ado about investing in defense.
Its biggest holdings are Bharat Electronics (18.61%), Hindustan Aeronautics (18.00%), Solar Industries (16.06%), Mazagon Dock Shipbuilders (8.74%), and Bharat Dynamics (7.61%). Its cost is greater at 1.06%, meaning it takes more to operate than some others. Nevertheless, it’s posted a 23.89% return since its inception, reflecting the strength of the sector. This fund is excellent if you like a set-it-and-forget-it strategy and wish to take advantage of India’s defense boom. Just watch the higher fees.
Also Read: Best Mutual Funds for Salaried Individuals
5. Invesco Aerospace & Defense ETF
The Invesco Aerospace & Defense ETF is not all about India—it invests in defense firms across the globe. This ETF is ideal if you wish to diversify your money outside a single nation and into the international defense market. It targets major aerospace and defense players.
Its largest holdings are big international defense companies, although specific names aren’t mentioned here. The cost ratio is 0.57%, which is reasonable for a global fund. It’s remained consistent over time, despite problems in global trade, since defense expenditures remain robust. What sets this ETF apart is its global reach, offering you an opportunity to invest in non-Indian defense companies. If you want a more general defense investment, this is a good choice.
6. SPDR S&P Kensho Future Security ETF
The SPDR S&P Kensho Future Security ETF is one that does things differently. It invests in firms developing future security, such as cybersecurity and future military technology, rather than classic defense. This makes it a forward-looking option.
Approximately 33% of its funds are invested in aerospace and defense, 26% in software, and 9% in communication equipment. The expense ratio is 0.45%, which is low for such a specialized fund. It focuses on innovative companies, so it’s a bet on the future of security. If you’re excited about new tech in defense and want a fund that looks ahead, this ETF could be for you. It’s different from the others because it’s not just about weapons—it’s about the next big thing.
Also Read: How Many Mutual Funds Should I Own?
7. iShares U.S. Aerospace & Defense ETF
The iShares U.S. Aerospace & Defense ETF is the largest on this list with more than $6.3 billion in assets. It concentrates on the defense industry in the U.S., one of the world’s largest defense markets. This ETF is all about size and stability.
Its largest holdings are large U.S. defense contractors, but names aren’t elaborated on here. It has a cost ratio that’s competitive, and it’s cheap for its size. It’s performed well historically because the U.S. just keeps spending a lot on defense. What’s particularly impressive is its enormous size and concentration on the stable U.S. market. If you need a solid, secure choice with a history of success, this ETF is an excellent choice.
7 Best Defence Sector Mutual Funds & ETFs for 2025: Comparison Table
| Fund/ETF Name | AUM (in crores) | Expense Ratio | Top Holdings |
|---|---|---|---|
| HDFC Defence Fund | 54,870 | Competitive | Bharat Electronics, Hindustan Aeronautics |
| Motilal Oswal Nifty India Defence ETF | 463 | 0.41% | Bharat Electronics, Hindustan Aeronautics |
| Groww Nifty India Defence ETF | 183 | 0.43% | Bharat Electronics, Hindustan Aeronautics |
| Aditya Birla Sun Life Nifty India Defence Index Fund | 664 | 1.06% | Bharat Electronics, Hindustan Aeronautics |
| Invesco Aerospace & Defense ETF | N/A | 0.57% | Global defense contractors |
| SPDR S&P Kensho Future Security ETF | N/A | 0.45% | Aerospace, defense, cybersecurity firms |
| iShares U.S. Aerospace & Defense ETF | Over $6.3B | Competitive | Major U.S. defense contractors |
Also Read: Best Mutual Fund Plans for Children
Conclusion
Investing in defense mutual funds and ETFs is an intelligent means of making your money grow in 2025. As governments are spending more on security and nations such as India are trying to develop their own defense equipment, the sector holds a lot of potential.
The choices we’ve discussed—such as the HDFC Defence Fund for active investing, or the Motilal Oswal and iShares ETFs for easy options—provide you with a range of options to invest in. If you prefer to invest in India or take it global, there’s something for everyone here. Incorporating them into your investment portfolio could prove worthwhile as the defense sector continues to expand.
FAQ: Best Defence Sector Mutual Funds & ETFs
1. What are defense sector mutual funds and ETFs?
These are ways to invest in companies that work in defense, like making military equipment or cybersecurity tools. Mutual funds are managed by experts, while ETFs trade like stocks.
2. Why invest in defense sector funds in 2025?
The defense industry is growing because of global security needs and more government spending, which could mean good returns for investors.
3. How can I invest in these funds?
You can buy them online through platforms like Groww or Dhan, or directly from the fund’s website.
4. What are the risks involved?
Prices can change if there’s political trouble or government policies shift, so there’s some risk to your money.
5. What is the potential return on these investments?
It’s hard to predict exactly, but with the sector growing, these funds could offer nice gains over time.
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