Up-and-coming: Is it time to bet on manufacturing funds?

India is manufacturing like never before, and investors are taking notice. The HSBC India manufacturing PMI index soared to the highest level in 16 years (59.1) in March, 2024. For the uninitiated, it is a survey-based gauge that indicates whether business conditions, as viewed by supply chain managers, are expanding or contracting. A reading above 50 suggests expansion. To capitalise on the trend, fund houses, too, are lining up thematic manufacturing funds. Tata AMC's passive offering and an active one from HDFC being the latest additions this month. Over half of the Rs 10,500 crore AUM of manufacturing funds (as of March, 2024) are managed by just three schemes that have been floated in the past one year. No cookies for guessing how this coincides with the S&P BSE Manufacturing Index's outperformance that began only recently from 2023. The passive route Of the eight manufacturing funds in the market, three are passively managed. Their performance can broadly be gauged from the benchmark manufacturing index, which mostly underperformed the broader market in the last few years. The active route Taking the active route to invest in the manufacturing theme leaves you with five actively-managed funds. Only two of which are more than a year old - Aditya Birla Sun Life (ABSL) Manufacturing Equity Fund and ICICI Prudential Manufacturing Fund . We put them against the diversified flagship equity funds of their respective AMCs - ABSL Frontline Equity and ICICI Value Discovery. This was done to gauge how