Return Tracker. Back in the game

In the last one year, infrastructure stocks have swiftly turned around from being the last in line to becoming market darlings. Infrastructure themed funds that invest in construction players, developers of roads, ports or airports, telecom, power, oil and gas, capital goods, and even banks have been major beneficiaries of this trend. Their returns hence are sparkling as they haven’t in years. In the one-year period, the best return is HDFC Infrastructure’s 83 per cent.

The range of returns is, however, quite vast. The least return, IDFC Infrastructure’s 40 per cent, is far below the topper. Of the 22 infrastructure funds, five have clocked returns in excess of 70 per cent.

Toppers such as HDFC Infra and Religare Infra remained almost fully invested in the markets over the months, allowing them to gain significantly from the rally. HDFC Infra cut exposure to banks and pure construction stocks over the past year, adding more to capital goods stocks such as Bharat Electronics, ABB, Siemens, Praj Industries and Transformers & Rectifiers, which have zoomed.

Religare Invesco Infra also eschewed banks. Though it didn’t churn its portfolio much in the past year it gained well from the rapid price run in top stocks such as Bharat Forge, Larsen & Toubro, VA Tech Wabag, and Gateway Distriparks. L&T Infrastructure’s returns are also just a notch below that of Religare Infra in the one-year period. But DSP BR India T.I.G.E.R, among the largest infrastructure funds and Franklin Build India, which was earlier a topper, haven’t done well in the one-year period. Build India and DSP BR T.I.G.E.R’s returns of 66 and 61 per cent put them in the mid-quartile range.

This could be because these two funds, though classified as infrastructure funds, have a broader investment criterion.

Build India invests in any sector that forms the ‘building blocks’ of the economy, allowing pharmaceutical and banking sector investments.

DSP BR India TIGER has a slightly different mandate of investing in those sectors than can benefit from structural reform, therefore covering a wide range of sectors.

With stocks in sectors such as infrastructure/construction and capital goods shooting up higher than others in the ongoing rally, both funds could have lost out due to a more dilutive sector presence. Franklin Build India, for example, significantly raised exposure to banks — to tamer performers such as ICICI Bank and HDFC Bank. Other tame stocks added include Cipla and Berger Paints. Build India was also far more cautious, keeping around 5 to 7 per cent in cash.

But over the longer three-year timeframe, this fund tops the charts while DSP BR T.I.G.E.R moved into the top quartile.

Topper HDFC Infra, and Reliance Diversified Power, the largest infrastructure fund, slipped several notches down the ranking on a three-year return basis. Religare Infra, however, still managed to retain its top-quartile performance during this period too.

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