A $3 billion fund at Kotak Mahindra Asset Management Co. is backing Indian defense stocks, wagering that geopolitical tensions will boost local arms production and support the government’s efforts to lower reliance on imports. Recent global conflicts will drive further defense investments, according to Upadhyaya in an interview last week. Evolving warfare trends, particularly the increasing use of electronic systems, are also driving sustained demand for domestic players.
Indian defense firms have rallied in recent years due to policy support for domestic production and the government’s focus on local procurement and capability building. Upadhyaya stated that the geopolitical environment will likely accelerate that shift, strengthening the long-term investment case for the sector.
The fund added radar maker Astra Microwave Products Ltd. in March and counts state-run peer Bharat Electronics Ltd. as a top holding. A defense sector measure representing companies from aerospace to missile makers has delivered more than 50% average returns over the last three years, outperforming most sectoral gauges in India.
Upadhyaya remains bullish on defense but has kept portfolios diversified amid volatility, staying fully invested while selectively adding to preferred sectors. Financial stocks also look attractive after the recent market drop, he noted.
