MFs bet on macro pick-up, push infra theme

Infrastructure stocks have got a push from an unexpected quarter — the country’s equity fund managers. Infra-based theme funds, which had lost favour among investors and product manufacturers, have once again started getting attention. Fund managers are betting on infra stocks, which are available at cheap valuation, on hopes that they will outperform once the economy recovers.

Industry officials said that fund houses are pushing the infrastructure theme by placing bets on capital goods, realty and engineering companies’ stocks.

“Once there is good recovery in the economy, these stocks will definitely be able to do well. Investors should look at this opportunity,” said Sankaran Naren, chief investment officer at ICICI Prudential Asset Management.

Mutual fund houses have been reportedly approaching distributors and actively campaigning for their marketing, spreading awareness about these funds in the past few months since the surge in infrastructure-sector stocks.

Some fund houses are even known to have sent presentations to investors along with switch-over forms, asking them to move into these funds, sources said.

Stock markets have been rising for the past three months ahead of the general elections, which are currently underway.

Market players expect that the Bharatiya Janta Party government led by Narendra Modi, who is considered to be pro-industry, will triumph in the elections. Analysts believe with a new government at the Centre, economic policies will receive a boost in the market and kick-start the investment cycle, which is likely to benefit interest-rate sensitive sectors such as capital goods and realty.

Over the past three months, the BSE capital goods sector index has moved up 16 per cent while the realty sector index has gained five per cent. During that period, the BSE Sensex has risen by 5.5 per cent.

According to fund managers, there is still more upside in these stocks, which make these funds hugely attractive for investors.

“In the past few months, there has been a sharp surge in the prices of these stocks. These funds will start to perform better if there is a stable government at the Centre,” said Sadanand Shetty, vice-president and senior fund manager equity at Taurus Mutual Fund.

Thematic fund based on the infrastructure theme first surfaced in 2004, launched by fund houses eager to capture the infrastructure boom. These funds did well and were popular among investors, distributors and fund houses alike.

However, the 2008 global economic meltdown led to a slowdown in the Indian economy, bringing down with it the infrastructure sector that has been struggling ever since to revive its fortunes.

Many investors booked profits in these funds and quit the scheme. Those who stuck with their investments are yet to see any meaningful returns.

According to Value Research, an online mutual fund tracker, in the past three years, these funds have fallen by as much as 14 per cent. However, returns in the past year as well as the past five-year period have been encouraging. Analysts attributed this pick-up in performance to the recent gains in these stocks.

In the last five years, the BSE capital goods index has gained 68.7 per cent. The BSE Realty sector still continues to underperform at -18.6 per cent returns. The BSE Sensex during this period has gained over 112 per cent.

The assets under management (AUM) numbers, however, are yet to catch up with the sentiment in the industry.

At present, there are 26-odd infrastructure theme funds, excluding the direct plans of these funds.

The total AUM under this category in the past three months has fallen by 114 per cent.