India’s manufacturing is gaining steam as the new hot investing theme.

Are you missing out?

It’s raining manufacturing funds

India’s rapid manufacturing push is prompting fund houses to increasingly offer manufacturing-focused thematic funds.

New guns keeping the lion’s share

Interestingly, over half of the Rs 10,500 crore AUM of these funds are managed by just 3 actively-managed schemes floated in the past one year.

The passive route: How do these funds perform

Passive funds’ performance can be gauged from the BSE Manufacturing Index. It underperformed the broader market 77% of the time in the last 5 years.

The active route

We looked for schemes more than a year old and found only two–Aditya Birla Sun Life (ABSL) Manufacturing Equity Fund & ICICI Prudential Manufacturing Fund.

Outdoing their diversified counterparts

We put these against flagship equity funds of their AMCs – ABSL Frontline Equity & ICICI Value Discovery. Both manufacturing funds outdid the flagship funds on a 5-year basis.

Trumped-up gains thanks to 2023

However, this was only because 2023 was an outlier year, where the two manufacturing funds did exceptionally well in line with the overall market.

Performance prior to 2023

Prior to 2023, the two funds trailed the flagship funds. For instance, the ABSL Manufacturing Fund returned 11% per year vs its flagship fund's 14% gains during 2019-2022.

Who wins?

Given their 5-year returns are bumped up only due to the gains in 2023, it would be problematic to declare them as winners.

Which fund does better stock-picking?

So, we further compared manufacturing stocks present in both the standalone funds & the flagship equity funds. To see our results, head on to the full story from the link below.