Infrastructure schemes ride market rally

The sustained rally in stocks of infrastructure-related companies have helped many infrastructure funds to feature among the top 25 diversified equity funds on the basis of their returns for the year ended Wednesday.

ICICI Prudential Infrastructure Fund has emerged as the best performing infrastructure scheme among eight others, with 66.59 per cent returns during the period.

DSP Merrill Lynch India T.I.G.E.R. Fund from DSP Merrill Lynch Mutual Fund and UTI Infrastructure Fund from UTI Mutual Fund occupied the second and third slots with annual returns of 63.44 per cent and 60.59 per cent respectively.

The energy sector is one of the major components of the three schemes' portfolios, with each of them investing over 16 per cent of their corpus in it. Other important sectors are construction, metal and metal products, and engineering.

On being queried, fund managers expressed their continued optimism on infrastructure.

Soumendra Nath Lahiri, senior vice-president and fund manager, DSP Merrill Lynch Mutual Fund, said, "We continue to remain positive on infrastructure. We believe there will continue to be a strong underlined demand for infrastructure products ahead".

R K Gupta, managing director and fund manager, Taurus Mutual Fund, cited the government's efforts to boost infrastructure as one of the reasons to remain upbeat on the sector. He also said the Infrastructure Development Finance Company's qualified institutional placement (QIP) offering should also prove positive.

Infrastructure Development Finance Company had a successful QIP offering of Rs 21 billion through the issue of 165,354,330 shares at Rs 127 a share. The issue generated interest from high quality institutional investors across Asia, Europe and the US.

Gupta further added that private sector companies' foray into infrastructure-related activities is yet another encouraging sign.

Both Lahiri and Gupta expect 15-20 per cent returns from the infrastructure sector over the next one year.

While Lahiri suggested that rising input costs could be a concern, Gupta warned that lowering interest of the private sector and venture capital funds in infrastructure could have negative repercussions.

Taurus Mutual also launched its infrastructure scheme, Taurus Infra TIP Fund in February, while SBI Mutual launched SBI Infrastructure Fund - Series I in May.