The mutual fund industry is all set to ride the manufacturing wave as a theme for investment. The Prime Minister-led National Democratic Alliance is forming the government for the third time in a row and vowing to continue incentive policies to boost corporate investments.
Two mutual fund houses — Motilal Oswal Asset Management and Invesco India MF – have filed papers with SEBI to launch thematic fund on manufacturing this month.
This will be in addition to the two new fund offers on manufacturing by Mahindra Manulife AMC and Baroda BNP Paribas, which will close by the end of this month.
In fact, one of the largest fund houses, HDFC AMC, raised a whopping ₹9,563 crore last month through its manufacturing fund. Launched in March, Canara Robeco Manufacturing Fund already had an AUM of ₹1,374 cr as of May-end.
In all, about five fund houses have launched NFOs based on manufacturing theme this year. Currently, there are eight manufacturing funds, and three of them are passively managed.
Shreyash Devalkar, Head Equity, Axis Mutual Fund, said the country’s manufacturing landscape has been undergoing a significant transformation, fuelled by the strategic adoption of the ‘China+1’ strategy, the Government’s PLI scheme, and improving infrastructure, which has helped smoothen last-mile delivery.
“Based on their risk profile, investors should invest across categories along with thematic funds and should be aware of the risks associated as thematic funds are cyclical in nature,” he said.
Among the existing funds, ICICI Pru and Aditya Birla Sun Life have manufacturing thematic funds, with a track record of five -year and AUM of ₹4,842 crore and ₹1,006 crore, respectively.
In the last six months, six manufacturing funds have offered an average return of 34 per cent with Quant Manufacturing Fund offering the highest return of 36 per cent.
In the last year, passive funds Mirae Asset Nifty India Manufacturing ETF FoF and Navi Nifty India Manufacturing Index Fund offered 60 per cent returns. Kotak Manufacture in India Fund gave a 54 per cent return in the said period.
Nifty India Manufacturing – TRI went up by 62 per cent in the last one year and 45 per cent over three years.
Riding high on the government’s performance-linked incentive schemes, domestic manufacturing sector is booming with favourable foreign direct investment flows.
The Government targets to increase the contribution of the manufacturing sector to GDP from 17 per cent to 25 per cent with the ‘Make in India’ and Atmanirbhar Bharat plank.
These initiatives have helped diversify the global supply chain and positioned India as a pivotal player in the international market.