What are Manufacturing Funds? Should You Include Them in Your Portfolio in 2024?
In the past few years, thematic funds have caught investors’ eye. Their assets under management (AUM) have doubled in the past year, to ₹ 4.21 trillion in July 2024 from ₹ 2 trillion in July 2023 .
Among the several thematic funds, manufacturing funds have been stellar performers, offering an average return of 60.70% in the last year (as of June 11, 2024) . With such eye-popping returns, do they deserve to be part of your portfolio? Let’s find out.
What Are Manufacturing Funds?
Manufacturing mutual funds primarily invest in stocks of companies engaged in the manufacturing sector. Investing in manufacturing funds allows you to participate in economic growth, potentially benefiting from several government initiatives to boost this sector.
Reasons to Invest In Manufacturing Funds In 2024
There are some compelling reasons for you to include these funds in your overall portfolio. Some of them are:
- Superior returns
As stated above, manufacturing funds have delivered astounding returns in the past year. Manufacturing funds from several fund houses have delivered returns up and above their benchmark indices. Earning superior returns from investment is one of the primary goals for investors and manufacturing funds have delivered on this front.
- Government’s focus on the development of the manufacturing sector
Over the years, the Indian government has undertaken several initiatives to fillip the manufacturing sector. Initiatives like ‘Make in India’ to transform India into a global manufacturing hub and self-reliant along with production-linked incentive (PLI) schemes have significantly enhanced the manufacturing output for various firms across industry verticals.
Export promotion and liberal foreign direct investment (FDI) schemes are various other initiatives undertaken by the government that have given a boost to the sector. During the recently tabled Union Budget 2024, the Government of India has announced several schemes for the sector, including:
- Setting up of 12 new industrial hubs and 50 multi-product food units
- Increasing the scope of credit guarantee scheme for the MSME sector
- Helping MSMEs open food safety labs
Further, the development of industrial parks and the expansion of the National Industrial Corridor Development Programmes are pivotal towards creating a conducive environment for this sector. These initiatives can go a long way in boosting the segment’s growth and that of companies operating within them.
- Major investments from behemoths
Several multinational corporations, such as Siemens, Samsung Electronics, PepsiCo, Micron, ABB, etc., have invested in India’s manufacturing sector. In the last five years, there has been a significant rise in the number of foreign technical collaborations in sectors like electronics, food processing, and mobile phones.
These, combined with India’s manufacturing prowess during COVID-19 by producing vaccines, have changed perceptions about India’s manufacturing capabilities.
Important Things to Keep In Mind
While manufacturing mutual funds have the potential to catalyse your portfolio, there are certain essential things to keep in mind before investing in them. Note that even the best manufacturing mutual funds are not immune to sectoral risks.
This means that they can get affected due to factors impacting the manufacturing sector such as technological disruptions, regulatory changes, environmental issues, etc. Also, as these funds are thematic in nature, as an investor, it is crucial for you to be aware of the macro trends before investing.
In Conclusion
A resilient economy coupled with the government’s initiatives to boost the manufacturing sector, investing in manufacturing funds can help you benefit from India’s growth story. That said, make sure not to expose too much of your portfolio towards them and adopt a well-diversified strategy for achieving your goals.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please read the SEBI-prescribed Combined Risk Disclosure Document before investing. Brokerage will not exceed SEBI’s prescribed limit.
