HDFC Manufacturing Fund NFO – Should you invest?

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.

HDFC Manufacturing Fund NFO – Issue Details and Review

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.

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