Infrastructure funds ride boom

Funds with over 65% returns outperform the Sensex gain of 53% in the past one year.

Riding high on the ongoing construction and real estate boom in the country, infrastructure funds continue to clock higher returns with schemes from Tata MF, UTI AMC and Prudential ICICI figuring among the top ten open-end equity schemes in the past one year.

Fund managers expect these funds to perform better in the days to come as most infrastructure companies are enjoying higher valuations on robust order books and expected future orders from the government's increased reliance on the public-private partnership route for developing ports, roads and power projects in the country.

Tata Infrastructure Fund (66.91 per cent), Prudential ICICI Infrastructure Fund (66.60 per cent) and UTI Thematic Infrastructure Fund (65.91 per cent) are some of the sectoral funds that have outperformed the Sensex growth for the past one year.

The Sensex has gained around 53 per cent closing at 13,696.31 today, from 8788.81 levels last year.

"Usually, the stocks, which the market expects to post higher growth in a short time, are seen as over- or higher-valued. At present, most of the infrastructure stocks are sitting on order books that are two-three times their current turnover. It means in the short to medium term, these stocks will be continuing with their pace of growth, which will eventually reflect into higher returns by the infrastructure funds," said Sanjay Dongre, fund manager, UTI Thematic Infrastructure Fund.

The government has been consistently ramping up its spending on roads, ports and allied infrastructure, and is likely to pump in around Rs 90,000 crore for infrastructure development.

During the past one year, cement and steel stocks have also gained in a big way, and analysts expect these scrips to continue yielding higher returns.

"Growth of infrastructure is inevitable if the economy is to continue with 8 per cent growth and aspire to grow at 10 per cent. In the view of more foreign investments flowing into the country, development of the sector is a must," said Ved Prakash Chaturvedi, managing director, Tata Asset Management.

During the one-year period, Sundaram PNB Paribas Select Mid Cap Fund topped the list with 71.90 per cent returns. SBI Global Magnum Global Fund (66.84 per cent), and Reliance Diversified Power Fund (66.84 per cent) were other open-end equity funds in the top ten list.