HDFC has launched a new fund offer for the defense fund.This NFO of him he will start subscribing on the 18thth May 2023. This mutual fund scheme invests in companies in the defense and related sectors. Because it invests in a single sector, it is said to be a thematic mutual fund and high risk. Should You Invest in HDFC Defense Fund NFO?What are the risk factors to consider before investing in such funds?
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HDFC Defense Fund NFO Issue Details
| scheme opens | May 19, 23 |
| the scheme ends | June 2, 2023 |
| Schemes for continuous purchases/sales are reopened | Within 5 business days |
| Minimum lump sum | 100 rupees |
| Minimum SIP | 500 rupees for 6 months |
| NAV of the fund | 10 rupees during NFO period |
| entry road | Nothing |
| end of load | 1% on redemption within 365 days |
| dangerous | very high risk |
| standard | Nifty India Defense TRI |
| fund manager | Mr. Abhishek Podar |
| Maximum TER | 2.25% |
Fund’s investment strategy
We achieve long-term capital appreciation by investing in equity and equity-related securities of companies primarily in the defense and related sectors.
There is no assurance that the investment objectives of this plan will be achieved.
Where will this scheme invest?
80% to 100% – Stocks and related products of defense and related companies
Up to 20% – Competitors
Up to 10% – REIT and InvITS units
Up to 20% – debt and financial market instruments
Up to 20% – units of mutual funds.
HDFC Defense Fund NFO – Why should you invest in such a fund?
1) Growth Potential: The defense sector is expected to grow strongly due to increased government spending and heightened geopolitical tensions. Investing in the HDFC Defense Fund offers investors the opportunity to participate in this growth potential.
2) Advantages of diversification: The HDFC Defense Fund provides diversification by allocating investments among various defense companies. This helps reduce the impact of specific company or industry risks on the overall portfolio.
3) Technological advances: The defense sector often sees significant technological advancements, which can drive innovation and growth for the companies involved. The HDFC Defense Fund aims to capitalize on these advancements, potentially providing investors with exposure to innovative and high-growth companies.
4) Powerful order book: Currently, Indian defense companies are showing strong order intake and growth potential with healthy balance sheets.
Risks/disadvantages of investing in the HDFC Defense Fund:
1) Sector Concentration Risk: The HDFC Defense Fund focuses on a specific sector – defense and related industries. Investing in sector-specific funds carries concentration risk, as fund performance is closely related to defense sector performance. Any unfavorable developments within the sector could impact the Fund’s returns.
2) Regulatory and political risks: The defense sector is subject to various regulatory and political factors that can affect its performance. Changes in government policies, defense budgets and geopolitical tensions can affect the Fund’s investments and earnings.
3) Market Volatility: Like any stock-based investment, the HDFC Defense Fund is subject to market fluctuations. Fluctuations in stock prices and broader market conditions can affect the performance of the Fund.
4) Liquidity risk: Investments in certain defense companies or related sectors may have limited liquidity, making it difficult to buy or sell securities at desired prices. This lack of liquidity can pose risks, especially during periods of market stress or when attempting to exit an investment.
Performance of existing mutual funds in this category
There is currently no single mutual fund in this category.
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HDFC Defense Fund NFO – Should You Invest Or Avoid?
In conclusion, the HDFC Defense Fund NFO offers an excellent opportunity for investors seeking exposure to the growth potential of the defense sector.
Positive factors include upside potential, diversification benefits from investments in defense companies, and HDFC’s credibility as a long-established asset manager.
However, investors should also consider negative factors such as concentration risks associated with sector-specific funds and the impact of regulatory and political factors. It is important for investors to carefully assess their risk tolerance and investment objectives before making any decision.
High risk investors can invest in such funds. As it is a thematic mutual fund and may underperform for several years, only a small portion of your portfolio should be invested.
Information source: HDFC Defense Fund SID
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Suresh KP is the founder of Myinvestmentideas. He is his NISM Certified – Investment Advisor and he is a NISM Certified – Research Analyst. I have been analyzing financial markets for the past 20 years. You can contact me at suresh@myinvestmentideas.com.
