Introduction
The Indian manufacturing sector is experiencing a substantial transition, fueled by government efforts such as the “Make in India” campaign and production-linked incentive (PLI) programs. One method to accomplish this is to use specific sectoral funds like the Aditya Birla Sun Life Manufacturing Fund. This program offers investors a compelling opportunity to capitalise on the crucial industry’s growing potential. This scheme intends to invest in equity/equity-related securities of firms that are directly or indirectly involved in the infrastructure industry.
In this article, we will conduct a comprehensive analysis of this scheme. It will cover its merits, past performance and reasons for investing in ABSL Manufacturing Fund.
Let us start our analysis by explaining what is exactly covered under this scheme.
What is the Aditya Birla Sun Life Manufacturing Fund?
The ABSL Manufacturing Equity Fund is an open-ended equity scheme that predominantly invests in companies engaged in the manufacturing sector.
After being launched on 31st Jan 2015, ABSL Manufacturing Fund has an impressive AUM (Asset Under Management) at Rs.1005.6 Crores as of 31.05.24. With a stellar and consistent track record, this stock has generated 13.02% returns since its inception.
This fund offers investors targeted exposure to the unique dynamics and growth drivers of the manufacturing industry by focusing solely on this segment.
As we learned about this fund’s overview, let us shed some line on the merits of this scheme as well. It will help us decide whether we should take this scheme into our portfolio or not.
Key Advantages of the Aditya Birla Sun Life Manufacturing Fund
The following merits give the investors a strong to invest in this scheme:
Targeted Exposure
- The fund concentrates on manufacturing companies, providing investors with exposure to the sector’s growth potential.
- This focus allows the fund managers to leverage their expertise and deep industry insights to identify high-potential companies.
Diversified Portfolio
- Unlike typical sectoral funds that may be heavily dependent on a single sub-sector, the ABSL Manufacturing Equity Fund spans a range of manufacturing sub-sectors, including pharmaceuticals, engineering, consumer goods, and automobiles.
- This diversification helps mitigate risks associated with sector-specific investments.
- It ensures that the fund’s performance is not overly dependent on any single manufacturing sub-sector.
Experienced Management Team
- Led by Mr. Harish Krishnan, the fund’s management team has a proven track record of identifying and investing in high-potential manufacturing companies.
- Their deep understanding of the industry and its growth prospects allows them to construct a well-positioned portfolio to capitalize on India’s ongoing manufacturing boom.
Aditya Birla Sun Life Manufacturing Fund: Historical Performance
Over the past five years, the ABSL Manufacturing Equity Fund has delivered impressive returns, outperforming the broader market. The fund’s performance metrics are noteworthy:
- Five-Year Average Annual Return: 28.49%
- Three-Year Annualized Return: 36.48%
- Ten-Year Annualized Return:81%
Let us dive further and learn about the various factors that should be kept in mind before investing in this scheme.
Risks and Considerations for ABSL Manufacturing Fund Investors
While sectoral funds like the ABSL Manufacturing Fund, carry higher risk due to their concentrated focus. The potential rewards can be substantial for long-term investors. Here are some considerations:
Volatility: The fund’s performance can be volatile, especially during economic downturns or sector-specific challenges.
Risk Profile: Due to its lack of diversification, the fund should be considered a part of a broader, diversified investment portfolio rather than a standalone investment.
Why Should You Invest in Aditya Birla Sun Life Manufacturing Fund?
Investors should carefully evaluate several factors before investing in the ABSL Manufacturing Equity Fund:
Portfolio Composition: A diversified mix of infrastructure-related companies is essential.
Management Team: The expertise and experience of the fund managers are critical.
Track Record: Consistent returns over various market cycles can indicate the fund’s potential to perform well in the future.
Expense Ratio: Lower expense ratios can enhance overall returns, especially in the long term.
Who Should Invest in the ABSL Manufacturing Fund?
The following points show if you can invest in this scheme or not:
Long-Term Investors
Objective can benefit significantly from the growth potential of the manufacturing sector.
The manufacturing sector often undergoes cycles of expansion and contraction. Long-term investors are well-positioned to ride out short-term volatility and capitalize on growth over time.
Risk-Tolerant Investors
- Those who are willing to take on higher risk for the potential of higher returns.
- Sectoral funds, including the ABSL Manufacturing Equity Fund, are inherently more volatile and less diversified than broader market funds. Investors should be comfortable with the potential for significant price fluctuations.
Investors Seeking Sectoral Exposure
- Individuals looking to diversify their portfolio with specific sectoral exposure.
- By investing in the ABSL Manufacturing Equity Fund, investors can gain targeted exposure to the manufacturing sector, which can be a crucial part of a diversified investment strategy.
Investors with Confidence in India’s Manufacturing Growth
- Those who believe in the long-term growth story of India’s manufacturing sector.
- Government initiatives such as “Make in India” and production-linked incentive (PLI) schemes are designed to boost the manufacturing sector. Investors who are optimistic about these policies may find this fund aligns with their investment thesis.
Investors with Adequate Portfolio Diversification
- Investors who already have a well-diversified portfolio and are looking to add a focused sectoral component.
- Sectoral funds should typically constitute a small portion of an overall investment portfolio to balance risk.
- This ensures that the impact of any downturn in the manufacturing sector is mitigated by other diversified holdings.
Assumptions Related to the Manufacturing Fund Sector
- Sectoral funds, particularly those focused on manufacturing, are not just about capitalising on current market trends; they are about investing in the future of a country’s economic foundation.
- By targeting companies that build and maintain essential infrastructure, these funds offer a unique pathway to participate in the growth story of an economy.
- However, investors should approach with caution, ensuring that their overall portfolio remains balanced and aligned with their risk tolerance and investment goals.
- By incorporating sectoral infrastructure funds wisely, investors can potentially enhance their portfolio’s performance.
- It will contribute to the vital development of infrastructure that supports economic growth and societal progress.
By following a strategic investment approach and conducting thorough research, investors can harness the potential of the ABSL Manufacturing Equity Fund to achieve significant long-term gains while benefiting from the ongoing boom in India’s manufacturing sector.
Conclusion
The ABSL Manufacturing Fund offers investors a unique opportunity to capitalize on the growth potential of India’s manufacturing sector. Investors can invest via a SIP plan to boost their portfolio with compounding returns. With its diversified portfolio, experienced management team, and strong historical performance, the fund can be a valuable addition to a long-term investment strategy.
As the Indian manufacturing industry continues to evolve, the ABSL Manufacturing Equity Fund may be a compelling choice for investors seeking exposure to this dynamic and promising sector.