Manufacturing Funds Trending: Why You Should Take in Your Portfolio?

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Get ready to invest in Manufacturing Mutual Funds based on a thematic theme, an opportunity that will knock on your door once and you have to take it right then and there. It is noted that the AMCs are launching funds in the manufacturing theme sector the reason being that manufacturing or thematic funds have delivered fantastic returns. In the last 1 year, the Nifty Manufacturing India Index has given the highest returns of 62%.

Let’s see what the future of manufacturing or thematic funds will look like, stay with us till the end so you don’t miss checking out our list of Best Manufacturing Mutual Funds for 2024.

Don't forget to check out "Manufacturing Mutual Funds: Everything You Need to Know" to refresh your memory!

What are Manufacturing Mutual Funds?

Manufacturing Mutual Funds are a type of thematic mutual fund that focuses specifically on the manufacturing industry. As per SEBI regulations, these funds must invest at least 80% of their total assets in stocks and related instruments of manufacturing companies, giving investors concentrated exposure to this sector.

The manufacturing theme is all set to become the next multi-bagger because of its powerful timing. Whenever a thing becomes publically desirable, technologically feasible and politically acceptable, the trend of that thing starts.

But how can you be sure? Let’s delve into finding some proof to support our theory of Manufacturing becoming the 3^rd largest economy provider.

5 Important Points Why Manufacturing Sector is Next Growing Theme

1. Thematic Funds Give High Returns

   After the lockdown for 4 years, it has been observed that Thematic Funds have given very high returns of 88% in the last year. The top 5 performers were the sectoral and thematic categories can be confirmed with the table given below.

   In this, the Manufacturing fund is a perfect fit for investors making the highest returns of 53% in 1 year. The government is focused on making India the 3^rd largest economy by making reforms like ‘Atmanirbhar Bharat’ and ‘Make in India’. In the next 5-10 years, the thematic sector will be on the boom and now is the right time to invest to make the highest returns for your portfolio.
   
   

   Category Name	1-Week Ret (%)	1-Month Ret (%)	3-Months Ret (%)	6-Months Ret (%)	YTD Ret (%)	1-Year Ret (%)	3-Yrs Ret (%)	5-Yrs Ret (%)	10-Yrs Ret (%)	Since Launch Ret (%)
   Equity: Thematic-PSU	8.97	7.77	10.17	38.97	30.2	90.67	37.45	26.94	15.13	24.15
   Equity: Sectoral-Infrastructure	9.02	10.76	17.18	33.23	28.5	69.07	33.23	26.18	16.97	13.72
   Equity: Thematic-Transportation	8.56	9.02	17.81	34.15	29.31	59.89	28.47	23.35	16.6	39.64
   Equity: Thematic-Manufacturing	8.15	10.18	15.3	31.15	26.15	56.65	23.69	22.75	0	26.29
   Equity: Mid Cap	8.78	9.26	14.15	22.54	19.46	52.54	24	24.5	18.79	22.15
   Equity: Thematic-Energy	4.12	5.64	9.05	25.91	19.09	50.56	19.62	23.66	17.79	13.45

   
   
   

2. The Manufacturing Theme is Focused Theme for Economic Growth

   India is becoming a major player in global manufacturing thanks to its focus on technology, innovation, and skilled workers. Currently, the Manufacturing Sector makes up about 17% of India's GDP, and this is expected to grow to 21% in the next 6-7 years. This growth highlights Indian Manufacturing sectr has the potential to play a bigger role in global supply chains.The government is helping by offering Production-Linked Incentives (PLIs) in various sectors like automobiles, pharmaceuticals, electronics, and textiles. These incentives provide financial benefits for companies that increase their production. Additionally, there are special loan schemes, like the Mudra loan and Vishkamra loan, to support small businesses.

   
   
   
   

3. Implementing Core and Satellite Strategy for Alpha Creation

   The core is your traditional investing, which includes a mix of assets that deal with general market trends, which will give you steady and stable returns. Whereas with Satellite investments you invest in tactical bets with a focus on emerging or trending stocks. 

   The manufacturing fund is your satellite investment which will create high returns while keeping your investments in Thematic Funds diversified and managing risks effectively.
   
   

4. Manufacturing Fund’s Performance

   The above table showcased that the category average of Manufacturing funds has outperformed the Nifty 500 TRI, its benchmark index every time.

   Amongst these 5 best manufacturing funds, ICICI Prudential Manufacturing Fund, being the oldest scheme in its category has given the highest returns of 63% in 1 year.

   Continuing the trend, the Kotak Manufacture in India Fund and ABSL Manufacturing Equity Fund, also did well in the short term, with high returns of 47% and 44% respectively over the past 3-6 months.

   Quant Manufacturing Fund and Axis Manufacturing Fund are both recently launched funds, but both have delivered strong performance in the short term.
   
   
   

   Scheme Name	Launch Date	AUM (Crore)	3 Months Returns (%)	6 Months Returns (%)	1 Yr Returns (%)	3 Yrs Returns (%)	5 Yrs Returns (%)
   ICICI Prudential Manufacturing Fund	07-10-2018	3883	10.99	29.83	63.83	29.47	26
   Kotak Manufacture in India Fund	22-02-2022	1933	10.42	24.94	48.37
   ABSL Mfg Equity	31-01-2015	950	11.52	23.55	46.68	16.78	18.45
   Quant Manufacturing Fund	05-08-2023	652	9.49	32.63
   Axis India Manufacturing	21-12-2023	4683	14.7
   Canara Robeco Manufacturing Fund	11-03-2024	1242
   Category Average	-	-	11.42	27.74	52.96	23.12	22.23
   NIFTY 500 TRI	-	-	3.59	13.76	34.04	17.52	17.63

   
   
   

5. Flexi Cap or Multi Cap Strategy

   The Manufacturing Sector has a wide range of diverse stocks, which allows manufacturing-focused mutual funds to use a flexi-cap or multi-cap strategy to achieve better diversification and lower risk compared to sectors with a limited number of stocks. By investing across large, mid, and small-cap manufacturing companies, these funds can capture growth opportunities across the industry, while also reducing the impact if any particular stock or sub-sector underperforms. This flexible, diversified approach enables fund managers to dynamically adapt their investments based on changing market conditions, making it a suitable strategy for the evolving manufacturing landscape.

Endnote

Yes, you will surely hear from other investors and Mutual Fund experts talking about this amazing category, Manufacturing funds that are theme-based or thematic funds and so on. Investing in these will be your once-in-a-lifetime opportunity, so don’t let it slip.  Start your investments with a long-term SIP plan for added flexibility in your portfolio.

If you act now, you will be thankful that you did for the rest of your lives, check out Top 3 Manufacturing Mutual Funds