5 Mutual Funds Invested in Drone Stocks

#1 Franklin India Technology Fund

Franklin India Technology Fund is a 27-year-old thematic fund. The fund is mandated to invest at least 80% of its assets in technology and technology-oriented companies.

As of 28 February 2026, the fund manages an Asset Under Management (AUM) of Rs 16.70 bn.

The fund's expense ratio (direct plan) of 1.11% is a bit high. However, keep in mind that thematic funds generally have higher expense ratios.

The fund currently has about 97.2% of its portfolio invested in equities, with the remaining 2.8% held in cash and cash equivalents.

The IT software sector accounted for 40.9% of the portfolio, followed by telecom (18.36%), retailing (14.79%), IT services (9.06%), and fintech (4.59%).

The fund holds a concentrated portfolio of 23 stocks. Bharti Airtel had the highest weighting (18.36%), followed by Infosys (16.27%), HCL (7.44%), Eternal (6.67%), and TCS (5.97%).

The fund follows a measured churn strategy, reflected in its low portfolio turnover ratio of 0.26. This indicates a preference for holding positions through the business cycle rather than frequent trading.

With a standard deviation of 17.08, the scheme's volatility is lower than the benchmark's (22.24). A lower value indicates that the fund's returns fluctuate less relative to Nifty IT TRI over time.

The scheme outperforms the benchmark in mitigating drawdowns, with a Sortino ratio of 0.42, which is higher than the benchmark (0.06). A high Sortino ratio indicates that the fund generates stronger returns while taking relatively lower downside risk during market declines.

That is why, with a Sharpe ratio of 0.22 against the benchmark's 0.04, the fund also outperforms on a risk-adjusted basis. A higher value indicates the fund delivers better risk-adjusted performance across all market conditions.

The fund delivered a 10-year CAGR of 15.87%, outperforming the benchmark Nifty IT TRI (13.5%).

#2 HDFC Defence Fund

HDFC Defence Fund is a new scheme, launched on 2 June 2023. It is an open-ended thematic defence equity scheme with an AUM of Rs 80.97 bn.

The scheme seeks to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of defence and allied-sector companies.

The scheme expense ratio (direct plan) is 0.82%. The fund currently has about 96.3% of its portfolio invested in equities, with the remaining 3.7% held in cash and cash equivalents.

The fund holds 51.67% in largecaps, followed by smallcaps (27.13%) and midcaps (21.19%).

Industrials accounted for 15.39%, followed by consumer discretionary (11.66%), materials (16.51%), and technology (9.76%).

The fund holds a concentrated portfolio of 22 stocks, with the top 5 stocks constituting 62.57% of the portfolio. Holdings include Bharat Electronics (18.58%), Bharat Forge (15.72%), Hindustan Aeronautics (12.09%), Solar Industries (10.26%), and BEML (5.92 %).

Other defence holdings include Astra Microwave (4.92%), Bharat Dynamics (4.69%), Eicher Motors (4.45%), MTAR Tech (3.76%), and Premier Explosives (3.05%).

The portfolio's price-to-earnings (PE) ratio is 52.69, higher than the broader market. The scheme follows a buy-and-hold strategy, as indicated by a portfolio turnover ratio of 0.16.

The scheme is volatile in absolute terms, although its standard deviation of 28.72 is lower than the benchmark's 33.4. The scheme underperforms the benchmark (0.97) in mitigating drawdowns, with a Sortino of 0.75.

That is why, with a Sharpe ratio of 0.34 against the benchmark's 0.4, the fund also underperforms on a risk-adjusted basis. The fund has delivered a lower absolute return of 25.86% (1-year), against the benchmark's 35.79%.

#3 HSBC Infrastructure Fund

HSBC Infrastructure, launched in September 2007, is an open-ended thematic equity scheme focused on the infrastructure sector. It follows a disciplined investment approach anchored in fundamental research.

The fund focuses on scalable businesses with strong profitability, reasonable valuations, proven management, and solid financials. Stock selection is driven by proprietary research using a mix of quantitative and qualitative filters.

Companies are evaluated on business quality, ESG factors, and valuation, with portfolio construction aligned to a predefined risk framework.

As of 28 February 2026, the fund's AUM was Rs 23 bn, and the expense ratio (direct plan) is 0.99%. The scheme is almost fully invested with 99.04% equity allocation.

Large-cap accounts for 60.57% of the portfolio, followed by small-cap (24.36%) and mid-cap (14.11%).

In sector allocation, aerospace & defence accounts for 13.25%, followed by construction (12.08%), electrical equipment (10.67%), industrial products (10.65%), and power (10.62%).

The fund holds 53 stocks, with the top 10 accounting for 52.83% of the portfolio. NTPC has the highest weight of 9.9%, followed by BEL (7.83%), L&T (7.66%), Bharti Airtel (6.33%), and Reliance Industries (6.1%). It also holds 3.05% in HAL and 7.7% in L&T.

The scheme's PE multiple is 26.68, which is higher than the benchmark Nifty Infrastructure (20.3). The portfolio turnover ratio is moderate at 0.21, indicating a little churn strategy.

With a standard deviation of 17.85, the scheme is more volatile than the benchmark (14.22). The fund has shown weaker downside protection, reflected in a Sortino ratio of 0.56 versus 0.72 for the benchmark.

The Sharpe ratio (0.29) is lower than the benchmark (0.35), indicating the fund has underperformed the benchmark on a risk-adjusted basis.

However, with a 10-year CAGR of 16.53%, the fund has outperformed the benchmark (13.23%).

#4 Tata Digital India Fund

Tata Digital India Fund is an open-ended equity scheme (Sectoral Fund) that invests in the Information Technology (IT) sector.

The primary objective of the scheme is to seek long-term capital appreciation by investing at least 80% of its net assets in equity and equity-related instruments of IT companies in India. The remaining 20% or less may be invested in equity, debt, or money market instruments.

The fund has the flexibility to allocate up to 20% of its average assets in overseas securities and overseas Exchange Traded Funds, allowing it to capture global tech opportunities.

Also, to enhance portfolio returns, the fund can lend its securities to SEBI-approved intermediaries. It can allocate 20% to 25% of net assets to stock lending, charging a negotiated fee while maintaining collateral that is always higher than the security's value.

The scheme permits the use of derivatives up to 50% of net assets for non-hedging purposes.

The fund managers follow a Growth at Reasonable Price investment style. The strategy focuses on structural stories, targeting companies with strong balance sheets, the ability to invest in emerging technologies, and long-term growth potential.

The fund benefits from India's digital transformation, rising IT spending, and outsourcing of IT services.

As of 28 February 2026, the fund's AUM was just Rs 98.96 bn, with an expense ratio of 0.54% per annum.

Equity allocation is 93.35%, followed by cash and cash equivalents (6.65%).

True to its label, the portfolio is concentrated, with the IT accounting for 80.76%, followed by Industrials (3.47%), Financials (2.65%), Consumer Discretionary (2.25%), and Consumer Staples (0.25%).

The fund holds a concentrated portfolio of 45 stocks, with the top 10 stocks accounting for 70.35%. This concentrated approach allows the fund to take high-conviction bets.

The fund is dominated by largecap (67.35%), followed by smallcap (17.75%), and midcap (14.9%). Holdings include Infosys (19%), TCS (13.36%), Tech Mahindra (8.38%), Wipro (6.66%), and Eternal (4.83%).

The scheme's PE multiple is 24.72, a premium to the Nifty IT (21). The portfolio turnover ratio is low at around 0.19, indicating a buy-and-hold strategy.

With a standard deviation of 19.53, it's less volatile than the benchmark-Nifty IT TRI (22.24). The fund has also shown weaker downside protection, with a Sortino ratio (0.19) versus the benchmark (0.72).

The Sharpe ratio (0.11) is higher than the benchmark (0.04), indicating the fund has outperformed the benchmark on a risk-adjusted basis.

This is reflected in its performance. The fund has delivered a 10-year CAGR of 16.48%, beating the benchmark (13.5%).

#5 SBI Technology Opportunities Fund

SBI Technology Opportunities Fund is an open-ended thematic equity scheme focused on the technology sector.

As of 28 February 2026, the fund's AUM was Rs 42.74 bn, and the expense ratio (direct plan) is 0.92%.

About 97.26% of this scheme's AUM is in equities, 0.07% in debt, and 2.67% in cash equivalents. Large-cap accounts for 52.69% of the portfolio, followed by small-cap (24.45%) and mid-cap (22.86%).

In sector allocation, IT accounts for 56.11%, followed by consumer services (16.15%), services (10.77%), telecommunication (8.88%), and media, entertainment, and publication (2.2%).

The fund holds 34 stocks, with the top 10 accounting for 57.43% of the portfolio. Infosys has the highest weight of 13.37%, followed by Bharti Airtel (8.8%), TCS (6.3%), Eternal (6.11%), and LTIMindtree (5.22%).

The scheme's PE multiple is 28.08, which is higher than the benchmark-Nifty IT TRI (22.24). The portfolio turnover ratio is moderate at 0.24, indicating a moderate churn strategy.

With a standard deviation of 17.38, the scheme is relatively less volatile than the benchmark (22.24).

The fund has also shown better downside protection, reflected in a Sortino ratio of 0.26 versus 0.06 for the benchmark.

A higher Sharpe Ratio (0.14) compared to the benchmark (0.04) indicates that the fund has outperformed the Nifty IT TRI on a risk-adjusted basis.

Consequently, with a 10-year CAGR of 16.29%, the fund has outperformed the benchmark (13.5%).

Bottomline

India's drone ecosystem is still evolving, but the direction is becoming clearer.

The domestic drone market is expected to grow from US$ 0.47 bn in 2025 to about US$ 1.39 bn by 2030, while the broader drone industry could unlock the manufacturing potential of nearly US$ 23 bn by 2030.

Rising defence spending, policy support for indigenous manufacturing, and increasing use of unmanned systems across sectors are expanding the opportunity for companies linked to aerospace, defence electronics, and advanced technologies.

The mutual funds discussed above hold exposure to some of these businesses through their technology, defence, or infrastructure allocations.

As the ecosystem develops, companies operating across defence electronics, aerospace components, and advanced technologies could see growing participation in this value chain.

However, since sectoral and thematic funds are inherently concentrated, their performance can move sharply with changes in sector cycles and market sentiment.

#Table Note: Data as of 11 March 2026
Rolling period returns are calculated using the Direct Plan-Growth option.
Returns over 1 year are compounded annually.
Standard Deviation indicates risk, while the Sharpe ratio and Sortino ratios measure risk-adjusted return.
They are calculated over 3 years, assuming a risk-free rate of 6% p.a.
Please note that the returns here are historical.
The funds listed at the top of the table are ranked by 5-year returns. The list of schemes is not exhaustive.
Past performance is not an indicator of future returns.
The securities quoted are for illustration only and are not recommendations.
Speak to your investment advisor for further assistance before investing.
Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully.
Source: ACE MF

Disclaimer: This write-up is for information purposes and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are unsure about your risk appetite, consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks. Read all scheme-related documents carefully. Registration granted by SEBI, Membership of BASL, and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.