Defence sector funds have delivered strong returns so far in 2026, with the category generating an average return of 19% year-to-date (YTD), an analysis by ETMutualFunds showed. The analysis further showed that HDFC Defence Fund, the only actively managed fund based on the defence sector, delivered the highest return at 24.51% during the period. The sharp gains may make investors wonder whether they should increase their exposure to the category or wait for a better entry point.
Market experts believe the recent rally has been supported by factors such as higher defence spending, government policies promoting domestic manufacturing, strong order books and growing export opportunities. However, with valuations also rising after the sharp gains, investors need to assess whether the recent performance can continue and how much defence exposure fits into their overall portfolio.
