Fundline
The ‘make in India’ campaign has been picking up steam with the government focusing attention on attracting companies to invest in the country by setting up manufacturing plants. Looking at this opportunity even MFs have been preparing to launch funds to ensure that they benefit from companies that are active in this area.
There are some new funds that will hit the market whose investment is based on this theme and hence would comprise firms that would benefit from the measures here. The question is whether investors should look at such manufacturing funds because these will be different from what they might have seen in the past. Here is a closer look at the entire issue.
Since the whole idea is to benefit from the ‘make in India’ campaign, the funds that are launched or are in the pipeline will focus on manufacturing firms. These will be the ones to gain from the initiative. But this is a wide theme.
While on one side there will be several opportunities in terms of what the fund manager can choose from, there is also a danger that with such a wide canvas the fund could end up missing having those firms that could gain from the exercise. This will also be in contrast to the situation seen for quite some time wherein new-age and technology firms have been on top of the investor’s radar. This would actually be a change of focus in the sense that the majority of firms that find themselves on the list are likely to be the old economy companies as the idea is to benefit from the manufacturing focus.
The investor will also have to make a choice between an open-ended scheme or a close-ended one. They will have both these options when they go out to invest as different fund houses have decided to use both of these types of funds. In terms of an open-ended scheme, the investor has the choice to enter and exit at any point of time so this will require a constant check on the appropriateness of investment.
In a close-ended fund, however, the entry and exit points are restricted so the investor has to be careful in terms of making their decision. The key part is that the exit option is limited due to the lock-in so they must be ready to be able to stay with the investment for a longer time.
Every investor has to ensure that they make a MF investment only because it meets their goals or that they find something different in a fund that is not seen elsewhere in the market. In terms of the ‘make in India’ theme funds, the focus is on manufacturing so most firms that find a place here would be covered in terms of other idea and investments themes.
Thus many open-ended funds are likely to have the same firms in their portfolio. This might not result in something different for the investor in terms of the portfolio that has been created. But one has to ensure that if the fund manager is able to make selection of companies that are different from what is openly evident then there could be a large potential in terms of the gains that could arise from the investment. But this will remain a high-risk investment so the investor has to be careful in that sense.
(The author is a CA and Certified Financial Planner)
Source: Financial Chronicle
