Bet on manufacturing funds now

financialexpress.com:

Investors looking for sectoral themes can now bet on manufacturing funds as the new government’s focus on the manufacturing sector will ensure a supportive policy environment. The buzz around the manufacturing sector is driving asset management companies (AMCs) to launch new funds to capitalise on the growth potential of this vital sector.

Mahindra Manulife Mutual Fund, HDFC Mutual Fund and Baroda BNP Paribas Mutual Fund have launched manufacturing funds recently. The new fund offer of Baroda BNP Paribas Manufacturing Fund will close on June 24. In fact, HDFC Mutual Fund Manufacturing Fund raised Rs 9,563 crore, the third-highest collection ever for an NFO and accounts for over 27% of the total equity inflows in mutual funds in May.

Manufacturing funds invest in equity and equity-related securities of companies engaged in manufacturing activities. In the last one year, the existing five manufacturing funds have given returns of over 50%. However, investors must understand that while sectoral funds give high returns they also have high concentration risks.

Buzz on manufacturing

The emphasis on the manufacturing sector by AMCs could be seen as a strategic alignment with current government policies and economic trends. Nirav Karkera, head, Research, Fisdom, says while manufacturing does hold significant growth potential with initiatives like ‘Make in India’ and an emphasis on self-reliance, investors must maintain a diversified approach. “Overconcentration in any one sector can expose investors to higher risks, as seen in past market cycles. While manufacturing funds are appealing, they should be part of a well-rounded investment strategy,” he said.

Similarly, Sonam Srivastava, founder, Wright Research, says AMCs are