Can we replace the defective battery in warranty period?

See this excerpt from the "Your battery's maximum capacity" section of the support article: iPhone Battery and Performance - Apple Support

"A normal battery is designed to retain up to 80% of its original capacity at 500 complete charge cycles when operating under normal conditions. The one-year warranty includes service coverage for a defective battery. If it is out of warranty, Apple offers battery service for a charge." In other words, if maximum capacity is below 80%, the battery is below normal performance. You can still use a device with a lower health percentage than 80% but for optimal usage you may wish to consider having it changed when it reaches 80%.

Batteries are consumables and 1-2% loss per month is perfectly normal. According to iPhone Battery and Performance - Apple Support , Apple apparently only considers it unusual (and warrant-able) if a battery drops below 80% maximum capacity in less than a year after you receive it. Ergo, some storage loss as you use it is expected and acceptable. Incidentally, that possible 20% drop over the first 12 months equates to 1-2% drop per month being within the range of what Apple finds acceptable.

No, that would not qualify for a warranty replacement. When the battery health is at 80% or lower have it replaced by Apple or an authorized dealer.