India’s recent emphasis on advancing infrastructure development is a notable trend with substantial consequences. The 2024 Interim Budget underscored a considerable focus on infrastructure development, earmarking a historic budget of ₹11.11 lakh crore (3.4% of GDP). Numerous pivotal announcements were made across diverse sectors. Furthermore, the connection between India’s infrastructure development and the facilitation of foreign investment via Bilateral Investment Treaties (BITs) is anticipated to enhance India’s economic strategy.
Focusing on infrastructure-themed funds
The construction, logistics, and transportation sectors are certainly pivotal industries to monitor for heightened foreign involvement, spurred by India’s expanding focus on infrastructure development. Engaging in individual stock investments comes with inherent risks. Therefore, allocating funds to mutual funds operating in the infrastructure sector can be a prudent strategy for long-term wealth growth.
Mutual funds that invest in communication networks, transportation systems, and utilities such as gas, electricity, water, etc., fall within the infrastructure category. This broadens the scope of investment when choosing the right funds, enhancing the strength of one’s portfolio. Some of the best mutual funds in the infrastructure space that may help you grow your money in the long run include:
Canara Robeco Infrastructure Fund
The Canara Robeco Infrastructure Fund, provided by Canara Robeco Mutual Fund, concentrates on investments in companies actively engaged in and benefiting from the expanding infrastructure scenario in India. Commencing in December 2005, this fund adheres to a “Growth” style and carries a “Very High” riskometer rating. The fund exhibits a comparatively lower portfolio turnover in contrast to certain other infrastructure funds, possibly suggesting an emphasis on long-term investment strategies.
An attractive aspect of investing in this fund is its lack of consistent outperformance against its benchmark (S&P BSE India Infrastructure TRI) across various timeframes. Similar to other infrastructure funds, this fund comes with a high risk attributed to the inherent volatility of the sector. Nevertheless, when compared to certain peers, the fund manages smaller assets under management (AUM), potentially influencing its diversification and negotiation capabilities.
Bandhan Infrastructure Fund
Bandhan Infrastructure Fund, provided by Bandhan Mutual Fund, primarily invests in companies actively involved in and benefiting from the expanding infrastructure sector in India. With its inception in December 1999, the fund has a commendable track record and serves investors looking for long-term capital growth through exposure to infrastructure.
For investors looking to tap into India’s expanding infrastructure sector, the Bandhan Infrastructure Fund presents an intriguing option. The objective of the scheme is to achieve long-term capital growth by investing in companies actively involved in and benefiting from India’s infrastructure development. It predominantly focuses on equity and equity-related instruments for its investments.
An examination of the fund’s portfolio composition underscores its emphasis on sectors such as transportation, power, construction, real estate, and other industries related to infrastructure. Additionally, the fund may allocate investments to companies indirectly associated with infrastructure, including those involved in the supply of materials or equipment.
Quant Infrastructure Fund
For investors looking to participate in India’s burgeoning infrastructure sector, the Quant Infrastructure Fund presents another compelling option. Its objective is to generate capital appreciation and offer long-term growth opportunities by investing in a portfolio of companies that concentrate on the Indian infrastructure sector. The composition of the fund’s portfolio closely resembles that of other funds within the same sector, with a focus on industries such as transportation, power, construction, real estate, and other infrastructure-related sectors. Additionally, investments are made in companies involved in the supply of materials or equipment.
UTI Infrastructure Fund
The UTI Infrastructure Fund, provided by UTI Mutual Fund, is a reputable mutual fund designed to achieve long-term capital appreciation through investments in companies active in India’s infrastructure sector. Introduced in November 2002, the fund currently possesses a commendable performance history and substantial AUM.
The fund boasts an extensive history, surpassing 20 years of expertise in the infrastructure sector, demonstrating its adeptness in navigating diverse market cycles. The idea behind putting money in this fund revolves around generating capital appreciation by primarily allocating funds to equity and equity-related securities of companies directly or indirectly engaged in infrastructure-related activities within the Indian economy. The fund operates based on a sectoral theme, providing concentrated exposure to the infrastructure sector, which stands to benefit from India’s continuous development initiatives.
ICICI Prudential Infrastructure Fund
The ICICI Prudential Infrastructure Fund, provided by ICICI Prudential Mutual Fund, seeks to achieve capital appreciation by investing in companies involved in and profiting from the expanding infrastructure sector in India. Introduced in July 2005, it holds a “High” risk rating while showcasing a substantial AUM.
The investment goal is to pursue capital appreciation primarily by investing in equity and equity-related securities of companies involved in infrastructure-related activities or anticipated to derive benefits from them. The fund takes pride in its varied portfolio, investing across multiple infrastructure-related sectors such as transportation, power, construction, and real estate, providing extensive exposure. The substantial AUM in the direct plan reflect investor confidence and potential negotiating strength. Nevertheless, its comparatively elevated portfolio turnover in comparison to other infrastructure funds may potentially raise costs, thereby impacting its stability.
SBI Infrastructure Fund
The SBI Infrastructure Fund, provided by SBI Mutual Fund, strives to achieve long-term capital appreciation by investing in companies actively engaged in and benefiting from India's expanding infrastructure sector. Introduced in July 1996, this fund primarily allocates investments to equity and equity-related instruments of companies directly or indirectly involved in infrastructure-related activities within the Indian economy.
The fund possesses an extensive performance history and carries a “Very High” riskometer rating. Its substantial AUM size indicates investor confidence and potential negotiating strength. With an equity-centric portfolio, the fund predominantly invests in equities, potentially providing greater growth prospects compared to balanced infrastructure funds.
Letting performance speak for itself
The following table illustrates some of the top mutual funds in the infrastructure category along with their 10-year returns, thus, highlighting the need for investors to stay put without succumbing to the frequent highs and lows that this sector begets.
Name of the fund house | Name of the mutual fund | 10-year returns (in %) |
Quant Mutual Fund | Quant Infrastructure Fund | 26.19 |
ICICI Prudential Mutual Fund | ICICI Prudential Infrastructure Fund | 21.47 |
SBI Mutual Fund | SBI Infrastructure Fund | 21.39 |
Tata Mutual Fund | Tata Infrastructure Fund | 21.25 |
Canara Robeco Mutual Fund | Canara Robeco Infrastructure Fund | 21.11 |
Bandhan Mutual Fund | Bandhan Infrastructure Fund | 20.56 |
UTI Mutual Fund | UTI Infrastructure Fund | 17.82 |
| Source: AMFI (As of February 16, 2024) | ||
Infrastructure funds require a significantly long investment horizon, typically spanning 7-10 years, owing to their high risk and potential volatility. This underscores the necessity for a high risk tolerance to navigate market fluctuations and uncertainties. Investors considering the risk inherent in thematic funds must possess a clear comprehension of the risks associated with sector-specific funds, indicating their willingness to endure the constant fluctuations within this sector.
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First Published:
18 Feb 2024, 10:31 AM IST
