Aditya Birla Sun Life Launches Defence Sector Index Fund: Is It Worth Your Investment?

Aditya Birla Sun Life Mutual Fund has introduced the ABSL Nifty India Defence Index Fund, which is now open for public investment. The New Fund Offer (NFO) started on August 9 and will be available until August 23. Following this period, the fund will reopen for investments within five days from the date of allotment.

This fund is designed for investors looking to gain exposure to the defence sector, which benefits from government policies and offers diversification from broader market trends. With India ranking among the top four defence spenders globally—behind only the US, China, and Russia—the fund highlights a strategic opportunity for investors seeking to tap into this significant sector.

What type of mutual fund is this?

This is an open-ended index fund that tracks the performance of the Nifty India Defence Total Return Index.

What is the primary goal of this fund?

The main aim of this fund is to offer returns that closely align with the total returns of the Nifty India Defence Total Return Index. While the fund strives to mirror this index's performance, some tracking errors may occur, and achieving this goal is not guaranteed.

How can you invest in this fund?

To invest in this fund, you need to start with a minimum amount of Rs 500 and can subsequently invest in multiples of Rs 100. The fund offers both regular and direct plans, so you'll need to specify your choice on the application form.

Each plan provides the following options:

• Growth
• Income Distribution cum Capital Withdrawal (IDCW)

Are there other mutual funds like this available?

Yes, similar mutual funds focusing on the defence sector are offered by Motilal Oswal Mutual Fund and HDFC Mutual Fund.

How will the fund assess its performance?

The fund will measure its performance by comparing it to the Nifty India Defence Total Return Index. This benchmark will help gauge how well the fund tracks the index's returns and reflects its performance in the defence sector.

How does the fund allocate its assets?

The fund is designed to invest primarily in equities and equity-related securities that make up the Nifty India Defence Index, with an allocation ranging from 95% to 100%. The remaining 0% to 5% of the fund will be invested in debt and money market instruments, including cash and cash equivalents.

As of July 15, 2024, the key components of the index include Bharat Electronics (19.08%), Hindustan Aeronautics (18.28%), Solar Industries India (15.07%), Cochin Shipyard (10%), Mazagon Dock Shipbuilders (8.38%), Bharat Dynamics (7.66%), and Data Patterns (5.18%).

Are there any fees for entering or exiting this fund?

The fund charges an exit load of 0.05% of the applicable NAV if you redeem or switch out units within 30 days of the allotment date. After this 30-day period, there are no exit loads for redemptions or switches.

Who will be in charge of managing this fund?

The fund will be managed by Haresh Mehta and Pranav Gupta, who will oversee its investment strategy and performance.

Does this fund come with any risks?

According to the scheme’s risk-o-metre, this fund carries a very high level of risk. Investors should be aware that their principal investment could be subject to significant fluctuations. For more details, interested investors can visit this link.

FAQs

Q. Is it good to invest in Aditya Birla Sun Life Mutual Fund?

A. Fund Performance: The fund's annualized returns for the past 3 years & 5 years has been around 13.62% & 9.56%. The Aditya Birla Sun Life Medium Term Plan Fund comes under the Debt category of Aditya Birla Sun Life Mutual Funds.

Q. What is the Defence Index Fund?

A. The fund offers investors exposure to a diverse range of companies contributing to India's defence capabilities, including those involved in manufacturing, aerospace, shipbuilding and defence electronics.

Q. Is Aditya Birla a good sip?

A. Aditya Birla SIP (Systematic Investment Plan) is one of the preferable routes. It offers various plans to the investor to accumulate significant wealth in long-term planning. An investor may start it earlier at a young age and generate a substantial sum in 10 to 20 years.

Q. Why invest in defense?

A. Global market: Defence and security companies can often access a global market, as governments worldwide invest in defence capabilities to address evolving security threats. Such international sales opportunities can diversify revenue streams and mitigate risks associated with dependence on domestic markets.

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