Mar 12 2024, 07:56
Tata Motors, BPCL have doubled in a year. What do manufacturing stocks have in the making?
Outperforming the peers, top manufacturing-focused funds have returned between 64% and 44% in the last one year. Riding on India Inc's capital expenditure, these funds are aiming to capture growth over the next 10 years. But a lot will depend on capacity utilisation of industries and how private consumption comes around boosting demand.
Some four new manufacturing-focused funds have been launched in the last six months, taking the total to 10 as of February-end.
Shridatta Bhandwaldar, head of equities at Canara Robeco offered a hint to this optimism. "We think that confluence of factors such as conducive government policies, the government spend on capital expenditure, a sizable domestic market and India becoming part of the global supply-chain re-alignment (away from China) is likely to drive the scaling up of manufacturing in India multi-fold over the next decade."
To be sure, the rise of the manufacturing index is a new phenomenon even though the make- in-India theme has been playing out since September 2015. In fact, since its inception in June 2015, the BSE India Manufacturing Index underperformed the Sensex. But starting mid-January, it has started outperforming the benchmark.
Aditya Birla Sun Life MF and ICICI Prudential are among prominent players in the manufacturing fund arena, having launched their respective funds in 2015 and 2018, respectively, and paving the way for others to follow suit. Not to be outdone, other financial giants such as Kotak MF and Quant MF also threw their hats into the ring in 2022 and year 2023, respectively.
Three years ago, the manufacturing index had a very close correlation of more than 90% with the Sensex which changed two years ago. Today, the index is beating the Sensex and has a low correlation of around 80%. Manufacturing stocks have given high returns which gets reflected in the index.
ICICI Prudential Manufacturing Fund currently commands the highest AUM (assets under management) in this category. As of February-end the AUM of the scheme stood at INR2,708 crore.
In the last one year, ICICI Prudential Manufacturing Fund gave the highest return of 64.70%. Kotak Manufacture in India Fund, launched in March 2022, delivered 44.75% returns. ABSL Manufacturing Equity delivered 44.05%. All three schemes significantly outperformed the benchmark S&P BSE 500 TRI (Total Return Index) that went up 39% during the same period.
"If you believe India is going to grow at 7% and Indian consumption is going to continue, then we are going to need new capacities across the manufacturing segment," says Upadhyaya.
Sectors like oil and gas, iron and steel, retail, telecom and power were responsible for the majority of the INR8.6 lakh crore capital expenditure by India Inc in FY23, showed the Care Edge report. It also highlighted that in the first half of FY24, India Inc had an 80% share in the new capex announcement.
source:et
Mar 12 2024, 08:01
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