The changes apply to new systematic transactions. Existing SIPs and STPs will continue without any modification, the fund house said.
There are no restrictions on redemptions.
However, fresh lump-sum investments and switch-ins into the scheme remain restricted, in line with earlier measures. Brokerage on transactions will not exceed limits prescribed by the Securities and Exchange Board of India (SEBI).
What the fund does
The HDFC Defence Fund is an equity mutual fund that invests predominantly in companies in the defence and allied sectors. Launched in June 2023, the scheme is managed by Rahul Baijal and Priya Ranjan. Thedirect fund has an expense ratio of 0.78% and assets under management of about ₹7,305 crore.
The scheme follows a thematic strategy, focusing on a specific sector rather than investing across industries. Its stated objective is to generate long-term capital appreciation through exposure to defence-related businesses.
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What the changes mean
The introduction of a SIP cap and continued restrictions on lump-sum inflows indicate efforts to regulate fresh money entering the fund. Such measures are typically used by fund houses to manage fund size, liquidity, or portfolio concentration in sector-specific schemes.
Allowing only limited SIP and STP inflows, while keeping redemptions open, ensures that existing investors can continue their investments and exit if needed, without disruption.
Investor considerations
Thematic funds such as defence-focused schemes have a narrow investment universe and may be more volatile than diversified equity funds. Financial planners generally view such funds as suitable only for investors who understand sector cycles and are willing to take higher risk.
For those choosing to invest, staggered investments through SIPs, a long investment horizon and the ability to withstand interim fluctuations are often considered important.
Taxation overview
Equity mutual funds are subject to capital gains tax based on holding period. Gains of up to ₹1.25 lakh in a financial year are exempt if units are sold after one year; gains above this threshold are taxed at 12.5%. If sold within one year, gains are taxed at 20%.
Dividends from mutual funds are added to an investor’s income and taxed according to the applicable income tax slab. A tax deducted at source (TDS) of 10% applies if annual dividend income exceeds ₹10,000.
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First Published: May 4, 2026 7:02 AM IST