Another thematic offering: Now, Axis MF launches an India manufacturing fund

The open-ended equity scheme has been benchmarked against the Nifty India Manufacturing TRI and will open on December 1, 2023

Axis Mutual Fund on Wednesday launched a manufacturing fund,  an open-ended equity scheme, which will be benchmarked against the Nifty India Manufacturing TRI. It will open on December 1, 2023 and will be available till December 15, 2023.

The investment objective of the 'Axis India Manufacturing Fund' is to provide long-term capital appreciation by investing in companies engaged in manufacturing themes like capital goods, consumer durables, textiles and pharmaceuticals.

"This thematic fund, is designed to capitalise on India’s growing momentum, focusing on sectors that stand to redefine India’s industrial contours," said B. Gop Kumar, MD & CEO, Axis AMC.

Fund allocation strategy of the scheme

 

As per the scheme document, under normal circumstances, the asset allocation will be as follows:  

1. Equity and equity-related instruments based on the manufacturing theme: 80-100 per cent
2. Derivative instruments: Up to 45 per cent of the equity portfolio and five per cent of the debt portfolio
3. Cumulative gross exposure (equity, debt, REITs & InvITs, and derivatives): Not to exceed 100 per cent of net assets
4. Investment in securitised debt (excluding foreign securitised debt): Up to 40 per cent of the debt portfolio
5. Investment in units of debt and liquid mutual fund schemes: Up to five per cent of net assets, either in Axis AMC or other mutual funds, aligned with the scheme's objective.

 

The scheme will follow a bottom-up approach with a multi-cap stock selection strategy. A bottom-up approach usually refers to selecting stocks based on their specific merits, such as financial performance, management quality, and growth prospects.

In addition, the fund will adopt an active sectoral allocation and quality style of investing, focusing on the under-represented segments of Indian listed markets. 

Under the active sectoral allocation, the fund managers actively choose specific sectors for investment based on their assessment of market conditions and potential opportunities within those sectors.

The fund managers for the scheme are Shreyash Devalkar and Nitin Arora

"With the Axis India Manufacturing Fund, we aim to curate a portfolio that not only reflects the theme’s robust growth potential but also actively contributes to our investors' wealth creation opportunities, positioning them to benefit from the companies that are set to be the vanguards of this industrial renaissance,” said Ashish Gupta, Chief Investment Officer, Axis AMC.

Why the manufacturing theme?

According to the AMC, several government initiatives along with labour and tax reforms are making India a globally competitive manufacturing hub. Unlike other economies, the Indian economy is heavily dependent on consumption, which makes it less cyclical to global economic vagaries. 

“Some of the key reasons for the accelerating growth have been improving economic sentiment that boosts demand for products, and high-capacity utilisation that is enabling economies of scale,” it said.

The fund will identify companies across three segments of the Indian economy:

1. Investments (Capex Cycle): Manufacturers investing in factory equipment and R&D to build production capacity.

2. Consumption (Increasing income leads to premiumisation): Industries with a rising demand trajectory due to domestic consumption and a premiumisation narrative.

3. Net Exports (Focus on import substitution): Focus on companies benefiting from India’s integration into the global supply chain.

According to the scheme Risk-O-Meter, the risk associated with the principal is 'very high,' and the product is suitable for investors seeking capital appreciation over the long term and interested in an equity scheme investing in Indian equity and equity-related securities of companies engaged in the manufacturing theme.

The minimum application amount of the fund starts at Rs 500 and in multiples of Rs 1 thereafter. 

Currently, there are already three manufacturing-themed funds in the market. While  ICICI Prudential Manufacturing Fund has completed five years in the market, the  Kotak Manufacturing Fund was launched in 2022. Quant Manufacturing Fund was launched earlier this year in August. 

Should you invest? 

According to Value Research, investors should avoid funds that have a narrowly defined investment focus. "Instead, they should invest in flexi-cap funds which provide complete freedom to the fund management team to invest in companies from which it expects maximum gains," it said in a note.