Fund houses trying to capitalise on ‘Make in India’ theme with new launches

The Make in India theme is ubiquitous now — in the daily headlines, in official government tweets or an advertisement in YouTube videos. Now another platform you will find this on is with investments, especially new mutual fund schemes riding on the publicity given to the government’s favourite catchphrase.

In the last three to four months, several asset management companies have launched equity schemes or have filed scheme information documents with capital market regulator SEBI with either Make in India explicit in their scheme names or as part of their sales pitch.

On Wednesday, Tata AMC filed draft documents for the open-ended Tata Twenty Equity Fund. According to draft documents, the fund’s focus “would be on a selection of stocks from those sectors, which are likely to be benefited in medium- to long-term from the current economic policy of Government.” Sectors in focus include transportation, agriculture and food processing, urban infrastructure, energy, manufacturing, PSUs and technology.

The same day, Indiabulls submitted documents for its Make in India-Target Return Fund, which will invest predominantly in companies that are direct or indirect beneficiaries of the government’s ‘Make in India’ initiatives.

ICICI Prudential is launching a new series to its close-ended India Recovery Fund, while Sundaram recently launched two close-ended funds, the Sundaram Long-Term Tax Advantage Fund -Series I and Sundaram Top 100-Series IV & V—both focusing on Make in India stocks. JP Morgan has launched an India Economic Resurgence Fund and Pramerica has a Build In India Fund while Birla Sun Life launched its Manufacturing Equity Fund in late January.

The question arises if this trend indicates a return of thematic or sectoral funds, which have an unimpressive track record, or if these are plain vanilla funds riding on free government advertising. For instance, infrastructure funds were all the rage in 2007 but ranked worse than the stock markets did the following year. Also, the investment objective of these funds is highly diversified and sport the usual debt-equity mix. The equity focus itself is extremely generic, with anything from software to manufacturing to tourism coming under their purview.

Milind Barve, Managing Director, HDFC AMC, however, denies that the trend is a sales gimmick. “This is a sensible strategy for fund houses since Make in India, as a concept, is going to manifest itself in a number of sectors, which will stand to benefit. It is okay to define a large universe, but managers will pick stocks with the right investment opportunity.”

B Gopkumar, Head of Broking, Kotak Securities, has a contrarian view. “We are still to see any traction in the Make In India concept. Everybody is talking about creating capacity, but there is no large money coming in, more indigenous plants, but the ground reality is different.”

Trends can be deceptive, he says, referring to thematic funds of the past. “In 2003-05, consumerism was the buzzword and several lifestyle funds were launched. But they did poorly and had to eventually be merged with large equity funds.”

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