HDFC Manufacturing Fund: Why Should You Think of Investing Now?

Overview of HDFC Manufacturing Fund

India’s manufacturing sector is all set for significant growth, driven by factors like increased consumption, investments, exports, changing geopolitical dynamics, and government initiatives for self-reliance.

The launch of the HDFC Manufacturing Fund presents a timely opportunity for investors to tap into this potential. This scheme is a newly added stock in its category, with an AUM of Rs.10.345 Crores. Since its inception, it has generated 7.03% returns while it is new; backed by the HDFC AMC it builds support among investors.

This article will give the investors all the necessary details regarding this scheme. It will help them to make well-thought-out decisions about including this stock in their portfolios.

Key Highlights for HDFC Manufacturing Fund

• Type: Open-ended equity scheme.
• Objective: Generate long-term capital appreciation by investing primarily in equities of manufacturing companies.
• Portfolio Composition: At least 80% in stocks across diverse manufacturing sectors.
• Investment Approach: Flexible across market capitalizations, combining established leaders and emerging disruptors.
• Management: Led by Rakesh Sethia with over 19 years of experience in equity research.

Why Invest in HDFC Manufacturing Fund?

Making the right choice regarding investment is a crucial decision to make. The following points will suggest strong reasons to invest in this scheme:

1. Exposure to India’s Manufacturing Growth

• Government Initiatives: The “Make in India” campaign and other reforms are set to drive multi-decadal growth.
• Sector Potential: Manufacturing is expected to grow significantly, making it a cornerstone of India’s economic development.

2. Diversification and Flexibility

• Sector Spread: Investing across various manufacturing sectors mitigates risks associated with any single sector. This technique also gives us profits from various sectors, in which the stock is invested.
• Market Cap Diversity: Exposure to different market capitalizations ensures a balanced risk-return profile.

3. Experienced Fund Management

• Expertise: Managed by Rakesh Sethia, whose extensive experience and research capabilities aim to identify high-growth potential companies.
• Strategic Selection: Focus on companies with compelling long-term growth narratives.

4. Alignment with India’s Economic Vision

• National Development: Investing in this fund aligns with the broader goal of making India a global manufacturing hub by 2047.
• Economic Contribution: Participation in the fund supports India’s vision of economic self-reliance and growth. With the government backing this theme, it has many growth prospects for investors.

Time to Talk about the Fund Manager

Mr. Rakesh Sethia, the fund manager of the HDFC Manufacturing Fund, brings over 19 years of experience in the capital markets, specializing in equity research. With qualifications like CFA, FRM, MBA, and BBM, Sethia has a robust background in analysing and managing investments across sectors such as oil and gas, consumer durables, telecom, and logistics.

His previous roles at HSBC Securities & Capital Markets India Ltd and Morgan Stanley India Co. Pvt Ltd have equipped him with extensive expertise. Since April 26, 2024, he has been leveraging his strategic insights and analytical skills to drive the HDFC Manufacturing Fund’s performance, focusing on the burgeoning manufacturing sector in India.

What are the Risks and Considerations of HDFC Manufacturing Fund?

The key risks and considerations associated with the HDFC Manufacturing Fund are as follows:

Thematic Focus

• The HDFC Manufacturing Fund is a thematic fund that focuses on investing in the manufacturing and industrial sectors.
• This sector-specific approach means the fund has a higher risk profile compared to diversified equity funds, as it is susceptible to the performance and volatility of the manufacturing and industrial sectors.
• The concentration in a specific sector can amplify the risks, as the fund’s performance is directly linked to the fortunes of the manufacturing industry, which may be subject to economic cycles, regulatory changes, and other sector-specific factors.
• Investors need to be aware that the fund’s returns may be more volatile and potentially diverge from the broader equity market performance.

Investment Horizon

• Given the higher risks associated with the thematic focus, the HDFC Manufacturing Fund is more suitable for long-term investors with an investment horizon of at least 3-5 years.
• The longer investment horizon allows investors to ride out the potential volatility and sector-specific fluctuations that may occur in the short to medium term.
• This time frame provides the fund’s investments with the opportunity to benefit from the growth and development of the manufacturing and industrial sectors over the long run.
• Shorter-term investors may be exposed to higher risks and potential drawdowns, which could undermine their investment objectives.

Market Risks

• As an equity fund, the HDFC Manufacturing Fund’s performance is subject to the overall market risks and fluctuations in the stock market.
• While the fund aims to capitalize on the growth potential of the manufacturing and industrial sectors, there is no guarantee that it will always outperform the broader market or its benchmarks.
• Periods of market downturns or economic slowdowns can adversely impact the fund’s performance, even if the manufacturing sector as a whole performs well.
• Investors should be prepared to accept the inherent market risks associated with equity investments and the potential for the fund’s returns to deviate from the broader market indices.

Additional Tips for Investors of the HDFC Manufacturing Fund

Long-Term Horizon: Given the thematic nature of the fund, investors should have a long-term investment horizon of at least 3-5 years to potentially benefit from the growth in India’s manufacturing sector.

Diversification: While the fund focuses on the manufacturing sector, investors need to maintain a diversified portfolio across different sectors and asset classes to mitigate risk.

Monitor Economic Policies: Keep an eye on government policies and reforms that impact the manufacturing sector, such as the “Make in India” initiative and PLI schemes, as these can significantly influence the fund’s performance.

Stay Updated on Global Trends: Global economic trends and geopolitical shifts can impact India’s manufacturing sector. Stay informed about international trade agreements, supply chain dynamics, and global economic health.

Regular Reviews: Periodically review your investment in the fund to ensure it aligns with your financial goals and risk tolerance. Adjust your investment strategy as needed based on performance and market conditions.

Risk Tolerance: Understand the higher risk associated with thematic funds due to their sector-specific focus. Be prepared for potential volatility and sector-related risks.

Leverage Tax Benefits: Utilize the tax benefits associated with long-term capital gains to optimize your returns. Long-term capital gains on equity funds are taxed at a lower rate compared to short-term gains.

Consider SIPs: Systematic Investment Plans can be an effective way to invest in the fund, allowing you to average out the cost of investment and reduce the impact of market volatility.

Stay Informed: Regularly read fund updates, market analysis, and reports from the fund manager to stay informed about the fund’s strategy and performance.

Conclusion

The HDFC Manufacturing Fund offers a strategic avenue for investors to capitalize on the growth potential of India’s manufacturing sector. In order to give flexibility to your portfolio try to include this scheme via SIP.

With a strong focus on high-growth companies, sector diversification, and seasoned management, this fund is well-positioned to leverage the tailwinds driving the sector. Remember that investing for 5-7 years is the best strategy to make the most of a scheme.