Fund houses bet on domestic manufacturing sector: Market experts

Indian fund houses are upbeat about the growth of the domestic manufacturing sector. Mirae Asset Mutual Fund recently announced the launch of Mirae Asset Nifty India Manufacturing ETF and the Mirae Asset Nifty India Manufacturing ETF FOF.

Apart from these two, there are three funds which are focused on investing in companies that are engaged in manufacturing activities. Market players say the theme allows investors the opportunity to participate in potential emerging segments like electric vehicles, electronics, battery tech, defence among others.

Mirae Nifty India Manufacturing ETF is an exchange traded fund (ETF) tracking Nifty India Manufacturing Total Return Index, while the fund of funds (FOF) scheme will predominantly invest in Mirae Asset Nifty India Manufacturing ETF.

The Nifty India manufacturing index aims to track the performance of stocks that represent manufacturing sectors in the country. Officials in the industry say that while services and consumption have been the focus areas for investors, manufacturing has seemingly been underrated despite a strong performance over the last few years.

“Going forward, the manufacturing segment has the potential to become the next growth driver for India, backed by strong government initiatives like production-linked incentive schemes and the Make in India push. Over the past few years, India-based manufacturing companies have been increasingly incorporating digital and Industry 4.0 into their processes, becoming more efficient, productive and competitive, with improvements in quality as well,” said Swarup Mohanty, director & CEO at Mirae Asset Investment Managers (India).

Funds like Aditya Birla Sun Life Manufacturing Equity Fund have given returns of 21.39 per cent in the last one year, shows the data from Value Research. Others like BOI AXA Manufacturing and Infrastructure Fund and ICICI Prudential Manufacturing Fund have given returns of 51.01 per cent and 44.51 per cent, respectively, in the last one year.

Industry executives said Nifty India manufacturing index has outperformed the Nifty 50 Index in the last six out of eight calendar years.

The top three sectors of the index are automobile, industrial manufacturing and pharma. Despite the strong outlook for the sector, financial planners say such thematic funds will have a bout of volatility and are cyclical in nature.

Rushabh Desai, founder at Rupee With Rushabh Investment Services, said, “If the manufacturing funds are well diversified across various sectors, it will be less volatile compared to the pure sectoral bet. Given the current scenario, India’s manufacturing sector is in a ‘sweet spot’ as several of the global companies will look to set up shop in India. There has been a push even by the government for Make in India products in the last few years. However, these funds should be part of the satellite portfolio and not the core portfolio.”