In today’s mutual fund market, you have various fund opportunities to choose. There are different types of sectoral funds that investors can choose themselves. One of the booming sectors is India’s manufacturing sector. Over the last few years, AMCs started launching their manufacturing funds that invest in the top companies involved in manufacturing.
Do you know about the Make in India initiative? Make in India is a flagship program launched by the Government of India in September 2014, with the primary goal of transforming India into a global manufacturing hub. As the government focuses on manufacturing, we investors have the opportunity to invest in the best manufacturing mutual fund to create long-term wealth. In this article, we will deep dive into the top manufacturing funds to help you find the best funds in the sector.
Table of Contents
What are Manufacturing Mutual Funds?
Manufacturing Mutual Funds are a specialized type of sectoral/thematic mutual fund that primarily invest in companies involved in the manufacturing sector. These funds focus on industries such as automobiles, electronics, chemicals, and pharmaceuticals, allowing investors to capitalize on the growth potential of India’s manufacturing landscape. As reported by MySIPonline, the regulations set by the SEBI, these funds must allocate at least 80% of their total assets in equity and equity-related instruments of manufacturing companies, which provide a concentrated exposure to this sector’s performance.
The appeal of Manufacturing Mutual Funds lies in their potential for significant returns, particularly as India aims to enhance its position as a global manufacturing hub under initiatives like “Make in India.” This strategy is expected to drive economic growth and job creation, with the manufacturing sector projected to grow from contributing around 17% to GDP to approximately 21% in the coming years. Investors are drawn to these funds not only for their focus on high-growth sectors but also for the diversification they offer within the manufacturing theme, which can help mitigate risks associated with investing in a single industry.
However, investing in Manufacturing Mutual Funds comes with inherent risks, similar to Infrastructure Funds. The sector is characterized by cyclicality; its performance can be heavily influenced by macroeconomic factors such as interest rates and global demand. As such, these funds are generally suited for investors with a higher risk appetite and a long-term investment horizon of at least 5-7 years, which allow them to ride out market fluctuations and benefit from eventual sector recovery.
1. ICICI Prudential Manufacturing Fund
ICICI Prudential Manufacturing Fund is the one of the oldest funds than any other funds mentioned here. The investment objective of the scheme is to generate long-term capital appreciation by creating a portfolio that is invested predominantly in equity and equity related securities of companies engaged in manufacturing theme.
| Top 10 Companies | Weightage |
|---|---|
| Ultratech Cement Ltd | 6.25% |
| Sun Pharmaceutical Industries Ltd | 5.19% |
| Maruti Suzuki India Ltd | 4.22% |
| Larsen & Toubro Ltd | 3.65% |
| Mahindra & Mahindra Ltd | 3.59% |
| Cummins India Ltd | 3.59% |
| J S W Steel Ltd | 3.47% |
| Hindalco Industries Ltd | 3.40% |
| Bharat Forge Ltd | 2.94% |
| Hindustan Aeronautics Ltd | 2.82% |
2. HDFC Manufacturing Fund
HDFC Manufacturing Fund is a higher AUM fund of manufacturing sector. Its benchmark is Nifty India Manufacturing Index. The fund offer min ₹100 Lumpsum and SIP option.
| Top 10 Companies | Weightage |
|---|---|
| Mahindra & Mahindra Ltd | 5.56% |
| Sun Pharmaceutical Industries Ltd | 5.23% |
| Maruti Suzuki India Ltd | 4.56% |
| Tata Motors Ltd | 4.53% |
| Cipla Ltd | 3.40% |
| Larsen & Toubro Ltd | 3.24% |
| Reliance Industries Ltd | 2.60% |
| Aurobindo Pharma Ltd | 2.46% |
| J S W Steel Ltd | 2.42% |
| Hindustan Petroleum Corporation Ltd | 2.10% |
3. Axis India Manufacturing Fund
Axis India Manufacturing Fund was launched in December 2023, which means it is a new fund. Here are the top 10 holdings:
| Top 10 Companies | Weightage |
|---|---|
| Mahindra & Mahindra Ltd | 6.40% |
| Sun Pharmaceutical Industries Ltd | 5.41% |
| Reliance Industries Ltd | 3.91% |
| Bajaj Auto Ltd | 3.74% |
| Tata Motors Ltd | 3.60% |
| Hindalco Industries Ltd | 2.35% |
| Cipla Ltd | 2.05% |
| Bharat Electronics Ltd | 2.03% |
| Cummins India Ltd | 2.01% |
| Bharat Petroleum Corporation Ltd | 1.89% |
4. Canara Robeco Manufacturing Fund
Canara Robeco Manufacturing Fund is also a new fund launched in March 2024.
| Top 10 Companies | Weightage |
|---|---|
| Mahindra & Mahindra Ltd | 4.08% |
| Bajaj Auto Ltd | 3.58% |
| Maruti Suzuki India Ltd | 3.48% |
| Bharat Electronics Ltd | 3.36% |
| Hindustan Aeronautics Ltd | 2.56% |
| Reliance Industries Ltd | 2.47% |
| Suzlon Energy Ltd | 2.45% |
| Tata Steel Ltd | 2.42% |
| Cummins India Ltd | 2.24% |
| Kaynes Technology India Private Ltd | 2.22% |
5. Quant Manufacturing Fund
Quant fund house becomes a favourite AMC among new investors, as their most of the funds has given tripple digit return within last 3-4 years. For those investors who like an aggressive, high volatile manufacturing fund, they can look at the Quant Manufacturing Fund.
| Top 10 Companies | Weightage |
|---|---|
| ITC Limited | 9.39% |
| Reliance Industries Ltd | 9.16% |
| Motherson Sumi Systems Ltd | 8.85% |
| Grasim Industries Limited | 6.66% |
| Aurobindo Pharma Ltd | 6.47% |
| Himadri Speciality Chemical Ltd | 5.02% |
| Ador Welding Ltd | 4.78% |
| Laxmi Organic Industries Ltd | 4.43% |
| Britannia Industries Ltd | 4.08% |
| Zydus Wellness Ltd | 3.69% |
From the holdings of these manufacturing funds, you may notice most of them investing in the vehicle companies like Mahindra & Mahindra, Bajaj Auto, etc, excluding Quant. It looks like Quant AMC is approaching their unique investing style when choosing stocks.
Which Manufacturing Fund is Best?
There is no single answer for the question “Which manufacturing fund is best?” Because there are less than 5 years of data for most of the funds in the category. That’s why you can consider a few highlights of the funds that suit different types of investors.
For those who prefer a Higher AUM fund and want to start sip or lumpsum investment starting at ₹100: HDFC Manufacturing Fund
For those who prefer an older fund: ICICI Prudential Manufacturing Fund
For those who expect higher return with extented risk and volatility: Quant Manufacturing Fund
FAQs
Manufacturing Fund vs Infrastructure Fund?
Historically Infrastructure funds performed better than manufacturing funds. More about Manufacturing vs infrastructure funds
Is HDFC Manufacturing Fund Good or Bad?
AUM-wise with a lower min sip and lumpsum amount, HDFC Manufacturing Fund is considered good. However, as the fund was launched in 2024, there are no historical track record for a longer period of time.
Is it good to invest in a Manufacturing Fund?
Yes, investing in manufacturing funds could be a great choice as India is becoming self-reliant over the years.
Many investors think that manufacturing funds and infrastructure funds are the same. But they are different and different companies available in the country who particularly work in manufacturing or in infrastructure. As both manufacturing and infrastructure funds are sectoral, it comes with higher risk.
That’s it for this topic. If you found this article helpful, consider reading our other articles.
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