Best Defence Sector Mutual Funds in January 2026 Based on 1-Year Returns

India’s defence sector remains a key focus area for investors as the government continues to prioritise self-reliance, indigenous manufacturing, and defence exports under long-term policy initiatives.

Defence-focused mutual funds continue to attract interest from investors seeking thematic exposure aligned with India’s strategic and industrial growth trajectory.

In this article, we analyse the leading Defence Sector Mutual Funds as of January 2026, ranked by 1-year absolute returns, along with their AUM, expense ratios, tracking errors, and a brief scheme overview.

Best Defence Sector Mutual Funds in January 2026 Based on 1-Year Returns

Note: The data above is as of January 2, 2026 and is ranked as per 1-year returns.

Overview of the Defence Sector Mutual Funds in January 2026

1. Aditya Birla SL Nifty IndiaDefenceIndex Fund

Aditya Birla SL Nifty India Defence Index Fund leads the category in January 2026 with a 19.16% 1-year return, benefiting from strong performance across listed defence manufacturers and allied companies.

Key Metrics

• Expense Ratio: 0.33%
• Tracking Error: 0.06%

2. Motilal Oswal Nifty IndiaDefenceIndex Fund

Motilal Oswal’s defence index fund delivered an 18.38% 1-year return, maintaining consistent performance while closely tracking the underlying defence index.

Key Metrics

• Expense Ratio: 0.50%
• Tracking Error: 0.11%

 3. HDFC Defence Fund

HDFC Defence Fund recorded a 9.48% 1-year return. As an actively managed thematic fund, it focuses on selective stock picking within the defence ecosystem, making it suitable for investors with a long-term investment horizon.

Key Metrics

• Expense Ratio: 0.80%
• Tracking Error: 5.37%

Best Defence Mutual Funds in January 2026 Based on AUM

Note: The data above is as of January 2, 2026 and is ranked as per AUM.

Read More: Best Semiconductor Mutual Funds for January 2026: Motilal Oswal Flexi Cap Fund, Tata Digital India Fund and More Based on 3-Year CAGR.

Conclusion

Defence sector mutual funds continue to gain prominence as India strengthens its defence manufacturing capabilities and export footprint. While recent returns highlight strong sector momentum, investors should assess these funds based on their risk tolerance, investment horizon, and portfolio diversification needs rather than relying solely on short-term performance metrics.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute personal investment advice. Investors should conduct their own research and consult financial advisors before making any investment decisions.

Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully before investing.