HDFC Mutual Funds has launched Manufacturing Fund NFO. This mutual fund scheme would invest majorly in manufacturing companies. This category of funds has delivered 18% to 27% annualized returns in the last 5 years. Should you invest in HDFC Manufacturing Fund NFO? What are the various risk factors associated with such funds?
HDFC Manufacturing Fund (NFO) – Issue details.
HDFC Manufacturing Fund is an open-ended equity scheme. Below are the NFO details.
| Fund Name | HDFC Manufacturing Fund |
| NFO Opens | 26-Apr-24 |
| NFO closes | 10-May-24 |
| Scheme reopens for continuous purchase/sale | Within 5 working days |
| Minimum Application Amount | Rs 100 and in multiples of Rs 1 thereafter |
| Minimum SIP | Rs 100 for 6 months |
| NAV of the fund | Rs 10 during NFO period |
| Entry Load | Nil |
| Exit Load | 1% for redemption Within 30 days |
| Risk | Very High Risk |
| Benchmark | NIFTY India Manufacturing |
| Fund Manager | Rakesh Sethia |
HDFC Manufacturing Fund SID
What is the investment objective of this MF scheme?
To provide long-term capital appreciation by investing predominantly in equity and equity related securities of companies engaged in the manufacturing activity.
There is no assurance or guarantee that the investment objective of the scheme will be realized.
What is the allocation pattern in this mutual fund?
This fund invests pattern is as follows:
| Type of instruments | Min % | Max % | Risk Profile |
|---|---|---|---|
| Equity and Equity related instruments of companies in engaged in manufacturing theme | 80% | 100% | Very High |
| Equity and Equity related instruments of companies other than above |
0% | 20% | Very High |
| Units of REITs and InvITs | 0% | 10% | Medium to High |
| Debt securities*, money market instruments and Fixed Income Derivatives |
0% | 20% | Low to Medium |
| Units of Mutual Fund | 0% | 20% | Low to High |
Past Performance of the Manufacturing Mutual Funds
There are few existing funds that are investing based on manufacturing theme. Below is the performance of these funds. Returns over 1 year are annualized and data is as of 15-Apr-24.
| Scheme Name | 6M | 1Y | 3Y | 5Y |
|---|---|---|---|---|
| Bank of India Manufacturing & Infrastructure Fund | 28% | 62% | 34% | 27% |
| ICICI Prudential Manufacturing Fund | 33% | 66% | 33% | 25% |
| Aditya Birla Sun Life Manufacturing Equity Fund | 24% | 51% | 20% | 18% |
| Quant Manufacturing Fund | 35% | – | – | – |
Why to invest in HDFC Manufacturing Fund NFO?
Here are the major reasons to invest in this fund
- Manufacturing sector could be the next growth driver in India as there is strong government support through Production Linked Incentive Scheme and Make in India. The manufacturing GDP is expected to grow at 2.8x rate by 2030 compared to 2x rate of normal GDP.
- This fund provides an opportunity for investors to participate in emerging segments like electric vehicles, electronics, battery technology, defence etc.,
- This theme of mutual funds has delivered 18% to 27% annualized returns in the last 5 years.
Risk factors in such funds
One should consider some of these risk factors / negative factors before investing.
- It invests only in manufacturing companies and hence termed as thematic mutual fund. Due to concentration into single segment, its high-risk fund.
- This segment has under-performed compared to other equity funds till last year.
- You can refer complete risk factors in Scheme Information Document (SID).
HDFC Manufacturing Fund NFO – Should you invest?
This fund invests in manufacturing companies. Since it invests only in one segment, it is high risk.
Last year, in one of the Manufacturing Fund NFO review, we indicated that while the returns were on the lower side during that time, since make in India has been picking up in the last few years, such funds can deliver good returns if held for over 5 years. We continue to be positive on such themes for short to medium term.
High risk investors who want to test with new funds can invest in this NFO. Otherwise, one can look at some of the Top Manufacturing Mutual Funds that already have proven performance.
- 10.4% UGRO Capital NCD – Oct-2024 – Issue Details and Review - October 10, 2024
- 10.1% Muthoot Fincorp NCD – Oct-2024 – Issue Details and Review - October 7, 2024
- 11% Edelweiss Financial Services NCD Oct-2024 Issue Details - October 6, 2024
Invest in this is a good idea