Reviewing ABSL Manufacturing Equity Fund
The Aditya Birla Sun Life Equity Advantage Fund is an open-ended equity scheme primarily investing in companies within the Indian manufacturing sector.
It aims to leverage growth opportunities driven by government initiatives like “Make in India” and production-linked incentives (PLIs).
In this article, we will gather an understanding of this scheme and find whether it is worth investing in. As for its category, the manufacturing sector is on the rise after the Prime Minister’s backing. Let’s start reviewing this scheme.
Investment Objective: ABSL Manufacturing Equity Fund
The fund aims to achieve significant long-term growth by focusing mainly on investments in the stocks and related securities of manufacturing companies. Investors need to understand that, similar to all stock market investments, this fund involves certain risks and does not offer guaranteed returns.
How Does the Performance of ABSL Manufacturing Equity Fund Look Like?
As of July 19, 2024, the fund has delivered impressive returns:
- 5-Year Return: 161.69%, with an annualized return of 21.19%.
- Since Inception (February 3, 2015): 216.90%, translating to an annualized return of 12.96%.
These metrics demonstrate the fund’s ability to generate substantial long-term growth, outperforming many peers in the market.
Risk and Investment Horizon for ABSL Manufacturing Equity Fund
The fund is suitable for investors seeking long-term capital growth, with a recommended investment horizon of at least five years. It carries a moderate to high-risk profile, typical of equity funds, particularly those focusing on specific sectors like manufacturing. This risk is balanced by the potential for higher returns, especially in a sector poised for growth.
Portfolio Composition of ABSL Manufacturing Equity Fund
The fund allocates a minimum of 80% of its net assets to equity securities of manufacturing companies, covering various sectors including:
- Pharmaceuticals
- Engineering
- Consumer Goods
- Automobiles
- Metals and Cement
The remaining 20% is invested in cash, money market instruments, and debt securities to manage liquidity needs. This diversified approach helps mitigate risks associated with sector-specific downturns while ensuring potential for growth.
What are the Top Holdings of ABSL Manufacturing Equity Fund?
Some of the key holdings in the fund include:
Reliance Industries Ltd. (Energy): 5.66%
- Reliance Industries is a major conglomerate with a significant presence in the energy sector, particularly in oil and gas refining and petrochemicals.
- The fund’s exposure to Reliance Industries reflects the fund’s strategy of investing in industry leaders with strong growth potential.
- Reliance’s diversified business model and market dominance make it a compelling investment in the manufacturing-focused portfolio.
Bharat Electronics Ltd. (Capital Goods): 5.29%
- Bharat Electronics is a leading Indian defence and aerospace electronics company.
- The fund’s investment in Bharat Electronics showcases its focus on the capital goods and engineering manufacturing sectors.
- As a prominent player in the defense and high-tech electronics manufacturing space, Bharat Electronics offers the fund exposure to a high-growth and strategic industry.
Larsen & Toubro Ltd. (Construction): 4.73%
- Larsen & Toubro is a diversified conglomerate with a strong presence in the construction and infrastructure sectors.
- The fund’s investment in Larsen & Toubro reflects its interest in companies involved in the manufacturing and engineering of large-scale projects.
- As a leading infrastructure and construction company, Larsen & Toubro provides the fund with exposure to the growth potential in the construction manufacturing segment.
Tata Steel Ltd. (Metals & Mining): 3.57%
- Tata Steel is a major player in the steel manufacturing industry, with a global footprint.
- The fund’s exposure to Tata Steel highlights its focus on the metals and mining sector, which is an integral part of the manufacturing ecosystem.
- Tata Steel’s market position and ability to capitalize on the demand for steel make it a suitable investment for the fund’s manufacturing-focused portfolio.
Mahindra & Mahindra Ltd. (Automobile): 3.40%
- Mahindra & Mahindra is a prominent Indian conglomerate with a strong presence in the automobile manufacturing industry.
- The fund’s investment in Mahindra & Mahindra reflects its interest in the automotive manufacturing sector, which is a key component of the overall manufacturing landscape.
- As a leading manufacturer of automobiles, tractors, and other vehicles, Mahindra & Mahindra provides the fund with exposure to the growth potential in the automotive manufacturing segment.
These top holdings demonstrate the fund’s strategy of investing in industry-leading companies across various manufacturing sub-sectors. It aims to capture the growth and performance of the overall manufacturing sector in India.
Recent Performance and Outlook of ABSL Manufacturing Equity Fund
The ABSL Manufacturing Equity Fund has shown strong recent performance:
- 1-Year Return: Approximately 45.96%, higher than the category average of 45.2%.
- 3-Year Return:3%
- 5-Year Return:9%
This consistent outperformance indicates the fund’s robust investment strategy and the growing strength of the manufacturing sector.
Economic Factors Regarding ABSL Manufacturing Fund
The Indian manufacturing sector is experiencing a resurgence due to several factors:
- Government Initiatives: Programs like “Make in India” and PLIs are enhancing domestic manufacturing capabilities, reducing dependency on imports, and boosting exports.
- Demographics: Favorable demographics with a large, young workforce and lower labour costs.
- Infrastructure Development: Significant investments in infrastructure are supporting manufacturing growth.
These factors create a favorable environment for the fund’s investments, increasing the likelihood of continued strong performance.
Conclusion
Investing in the ABSL Manufacturing Equity Fund can be a strategic choice for those looking to benefit from the growth of India’s manufacturing sector. Its strong historical performance, combined with current economic conditions, suggests it may continue to deliver high returns. However, potential investors should consider their risk tolerance and investment horizon before committing funds, as equity investments are subject to market volatility.
Additional Considerations for Investors of ABSL Manufacturing Fund
Tax Implications: Returns from the fund are subject to capital gains tax. Short-term gains (if units are held for less than a year) are taxed at 15% Long-term profits of greater than ₹1 lakh in a financial year are taxed at 10%.
Entry and Exit Loads: The fund may have entry or exit loads, which are fees charged when you buy or sell the fund units. It is essential to check these charges as they can impact your net returns.
Expense Ratio: The annual cost charged by the fund house to manage the fund. Lower expenditure ratios can result in better net returns for investors.
Final Thoughts
Before investing in the Aditya Birla Sun Life Manufacturing Equity Fund, it is crucial to assess your financial goals, risk appetite, and investment horizon. If you are convinced to include this stock in your portfolio, SIP is the smart choice to gain good returns.
Consulting with a financial advisor can provide personalized insights and help ensure that this fund aligns with your overall investment strategy. With careful consideration and planning, this fund could be a valuable addition to your investment portfolio.
