A $3 billion fund managed by Kotak Mahindra Asset Management is trouncing the competition, outperforming 98% of peer funds through its strategic focus on Indian defense stocks. The fund's managers believe rising global tensions will boost domestic arms manufacturing, aligning with New Delhi's push to reduce import dependency.

The fund's bet on defense companies reflects a broader shift as India seeks to strengthen its domestic defense capabilities amid escalating regional tensions. This strategy directly supports the government's "Make in India" initiative for defense production, which aims to transform the country from a major importer to a self-reliant defense manufacturer.

Investors are increasingly viewing defense stocks as a defensive play in volatile markets. The fund's success suggests institutional confidence in India's defense sector growth trajectory, with local manufacturers positioned to benefit from both government policy shifts and changing geopolitical dynamics.