Mirae Asset Nifty India Manufacturing ETF gave 54.10% return, followed by Mirae Asset Nifty India Manufacturing ETF FoF which gave 53.50% return in the said period.
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Wondering what factors helped these funds to deliver this superior performance? “The resurgence in the manufacturing sector, as seen in the performance of manufacturing funds, is driven by several factors working together. Particularly, the strength of B2B businesses within manufacturing and related sectors has played a crucial role in boosting earnings growth and Return on Equity (RoE). This trend has been fueled by a worldwide shift towards diversified supply chains, which has prompted companies to rethink how they source materials. As a result, the sector has focused on enhancing its supply capabilities, using past years of underinvestment to strengthen financial positions and reduce debt,” said Sagar Shinde, VP Research, Fisdom.
He added, “This strategic evolution, coupled with proactive policy measures and technological advancements, has bolstered the performance of manufacturing funds, positioning them as primary beneficiaries of the sector’s resurgence. Additionally, government initiatives such as Make in India, PM Gati Shakti, industrial corridor development programs, and Aatmanirbhar Bharat have further buoyed optimism surrounding the manufacturing sector, amplifying its growth trajectory.”
“Mutual fund managers have leveraged these macroeconomic trends by strategically investing in specific stocks, resulting in impressive returns. For example, the ICICI Prudential Manufacturing Fund’s investment in GE T&D India Ltd., yielding over 550% returns in the past year, highlights the effectiveness of its stock selection approach. Additionally, data shows that 60-70% of stocks chosen by manufacturing mutual fund schemes have outperformed the Nifty 50 returns over the last year,” he further added.
In the last six months, these schemes offered an average return of 29.78%. Quant Manufacturing Fund offered the highest return of around 33.99%. ICICI Pru Manufacturing Fund gave 32.45% return. In the last nine months, these schemes gave an average return of 31.91%. ICICI Pru Manufacturing Fund gave the highest return of 42.67% followed by Mirae Asset Nifty India Manufacturing ETF which gave 34.57% in the last nine months.
Looking at this performance, thinking of investing in these schemes? What allocation and strategy should you follow? “Investing in manufacturing schemes can be enticing given the promising outlook of the sector and favourable macroeconomic trends. However, investors must consider their risk profile and investment horizon. These schemes are typically more suitable for aggressive investors with a long-term horizon of five years or more. Investors with a diversified portfolio and a higher risk tolerance may consider allocating a portion of their investments to manufacturing funds with a proven track record,” recommends Shinde.
He also recommends, “It’s advisable to avoid newly launched funds that haven’t undergone market cycles or tested the expertise of their fund managers thoroughly.”
Manufacturing based mutual fund schemes are benchmarked against Nifty India Manufacturing – TRI and Nifty500 Multicap India Manufacturing 50:30:20 – TRI. Nifty India Manufacturing – TRI gave 54.95% return in the last one year.
Note, the data for Nifty500 Multicap India Manufacturing 50:30:20 – TRI was not available in the database.
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Around two active manufacturing funds and three passive funds completed one year in the market.
On Sunday, BJP announced its election manifesto which focused on the manufacturing sector as well. BJP in its manifesto said, “We will further harness the potential of manufacturing in creating employment opportunities and expanding economic activity. We believe that our talent in research and design can be best complimented by expanding the manufacturing sector. We also understand the need for self-reliance and resilience in global value chains. Therefore, we will make all efforts to develop Bharat as a Global Manufacturing Hub.”
With BJP focussing on the manufacturing sector in its election manifesto, what is the way forward for this sector? “The outlook for the manufacturing sector appears promising. The manifesto’s focus on positioning India as a global manufacturing hub signifies a strong commitment to bolstering the sector. This aligns with broader economic objectives and could lead to significant growth opportunities, investment inflows, and job creation. The government’s proactive stance towards promoting manufacturing initiatives is likely to drive innovation, enhance competitiveness, and contribute to the sector’s overall development,” comments Sagar.
“Key focus areas within manufacturing will include defence, railways, electronics, textiles, automobiles & EVs, semiconductor & chip manufacturing, and pharmaceuticals. Major allocations are expected towards these initiatives through government schemes like Make in India, Production-Linked Incentives (PLI) etc.,” he adds.
We considered all regular and growth option schemes. We calculated returns for the last one year.
Thematic or sector schemes invest most of their corpus in a particular sector, and the performance of schemes is based on performance of the sector. That is why thematic or sector funds are recommended only to investors with thorough knowledge about the sector.
You should invest in these schemes only if you have a long investment horizon or have intimate knowledge about the sector to time the entry and exit in these schemes. Remember, every sector or theme can go out of fashion depending on the economic conditions. You should not make hasty decisions in those phases.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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