Defence Mutual Funds Gain 19% In 2026
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Defence mutual funds have returned an average 19% year-to-date in 2026. Rising defence spending is one reason. So are higher domestic production and growing demand across the sector.
An average 19% return has come from defence-focused mutual funds so far this year. Higher government spending, expanding domestic manufacturing and stronger demand for Indian defence products have supported the gains.
The sector has gained attention as India's defence ecosystem expands across aircraft, missiles, naval platforms, artillery, defence electronics, radar systems and unmanned platforms.
2026 YTD | 19% average return |
Last six months | Up to 23.88% |
Three years* | 34.49% |
*Long-term data is available only for funds with a three-year track record.
Higher Defence Spending Supports The Sector
Government expenditure has been a major factor behind the expansion of India's defence industry.
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Defence capital expenditure increased from ₹1.13 lakh crore in FY20 to ₹2.19 lakh crore in FY27.
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The broader defence budget rose from ₹2.53 trillion in FY14 to ₹6.81 trillion in FY26.
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Domestic procurement policies are increasing opportunities for Indian manufacturers.
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Export demand is opening another growth avenue for defence companies.
Orders, Manufacturing And Exports Add Momentum
A growing pipeline of defence contracts is supporting revenue visibility across several segments. More military equipment is now being made in India as the country pushes for greater self-reliance.
Indian defence companies are increasingly selling abroad. Successful deliveries and use of locally made systems are also making Indian products easier to trust.
Strong Returns Come With Sector Volatility
The 2026 gains followed a volatile period. Between mid-2024 and early 2025, defence stocks and funds dropped 15%–20%. The swings show that returns in this sector can change quickly
The limited track record of several defence-focused schemes also means their recent performance provides only a relatively short history for assessing consistency. Valuations, portfolio concentration and the earnings performance of underlying companies remain important factors when assessing the broader category.
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This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Vishwa has spent 10+ years across fintech and FMCG doing what most people miss, connecting the dots, catching trends before they trend, and finding the angle nobody else thought to ask about.
At Kotak Neo, she drives content strategy for neoshorts, Kotak News Desk, and Investing Guide, turning market noise into something worth reading.
When she's not decoding markets, she trades charts for canvases, chasing art, painting, and architecture across cities she's yet to explore.
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