From Defence Surge To Blueprints: Should You Give Infra Funds Some Space In Your Portfolio?

Defence costs vs infra funds: After a prolonged slump successful Indian equities from November 2024 to April 2025, markets began showing signs of revival by mid-April. Among nan first to use from this rebound were defence communal funds, which surged connected nan backmost of a operation of geopolitical triggers and favourable authorities policies. But pinch that crisp rally now cooling off, nan market’s attraction is progressively shifting toward different assemblage poised for semipermanent growth: infrastructure funds.

According to Chirag Muni, Executive Director, Anand Rathi Wealth Limited, nan defence money rally was driven by a confluence of factors. “Increased authorities spending connected defence modernisation, argumentation initiatives for illustration Make successful India and Atmanirbhar Bharat, and geopolitical tensions importantly lifted sentiment,” Muni explained. But he besides cautioned that specified momentum successful nan defence assemblage tends to beryllium event-driven and short-lived, often followed by a cooling-off phase.

A cardinal trigger this clip was nan Operation Sindoor launched connected May 7, 2025, which led to a important escalation successful geopolitical tensions pinch Pakistan. In nan 2 weeks pursuing nan operation, nan Nifty India Defence Index TRI rallied 22% (as of May 23, 2025), acold outpacing nan Nifty 500 TRI, which gained conscionable 3% during nan aforesaid period. “Clearly, nan marketplace picked its favourite regiment,” Muni noted.

Even earlier nan late-2024 correction, defence stocks had delivered staggering returns. From its motorboat successful January 2022 to its July 2024 peak, nan Nifty India Defence Index delivered an annualised return of 109%, aliases a cumulative summation of 519%. In comparison, nan broader Nifty 500 TRI returned a humble 19% annualised. But nan assemblage wasn’t immune to correction—the defence scale dropped sharply from July 2024 to February 2025, reflecting its inherent volatility.

Recent returns for defence communal costs further underline nan sector’s explosive potential. The Motilal Oswal Nifty India Defence Index Fund Direct Growth returned 26.11% successful conscionable 1 month. The Aditya Birla Sun Life Nifty India Defence Index Fund Direct Growth followed intimately pinch 26.10%, while nan Groww Nifty India Defence ETF FoF Direct Growth delivered 25.85%.

• Motilal Oswal Nifty India Defence Index Fund (Direct Growth): 1-month return of 26.11%

• Aditya Birla Sun Life Nifty India Defence Index Fund (Direct Growth): 1-month return of 26.10%

• Groww Nifty India Defence ETF FoF (Direct Growth): 1-month return of 25.85%

However, arsenic that rally originates to stabilise, infrastructure costs are emerging arsenic nan adjacent large taxable successful nan communal money space. “Infrastructure communal funds, aft months of underwhelming performance, person travel backmost strongly, riding nan broader marketplace recovery, authorities capex push, and an expected complaint trim rhythm by nan RBI,” Muni said.

According to nan latest data, infrastructure communal costs posted an mean return of 19.40% complete nan past 3 months, a crisp reversal from their one-year mean return of -3.15%. Top performers include:

Invesco India Infrastructure Fund pinch 26.82% three-month returns (vs -2.63% complete 6 months and -1.86% complete a year),

“Infrastructure is amended diversified compared to different thematic funds,” Muni explained. “It spans crossed cement, engineering, logistics, municipality housing, utilities, metals, telecom, and superior goods—reducing vulnerability to immoderate 1 sub-sector.”

While nan outlook for infra costs appears structurally strong, Muni advised restraint. “Sectoral and thematic costs transportation higher attraction risk. We urge investors limit vulnerability to 5–10% of their full portfolio and reserve these costs for those pinch higher consequence tolerance and a semipermanent horizon,” he said.

Top Performing Infrastructure Funds

For astir unit investors, Muni suggests diversified equity funds, which supply vulnerability crossed marketplace caps, industries, and themes. “They thief mitigate nan volatility and sector-specific risks that travel pinch thematic investments,” he added.

With defence costs having perchance peaked successful nan short term, and infrastructure costs gathering beardown momentum, investors would do good to align their allocations pinch some nan macroeconomic outlook and their ain consequence profile.