Mutual Funds

Looking to play the cycle

K Venkatasubramanian | Updated on January 24, 2018


A peep into Birla Sun Life Manufacturing Equity and JP Morgan India Economic Resurgence

After a string of close-ended schemes from fund houses, we now have two open-ended ones, looking to bet on the revival in India’s manufacturing and industrial growth.

Birla Sun Life Manufacturing Equity and JP Morgan India Economic Resurgence are setting store by the positive effects that would come about with an economic recovery in sectors such as capital goods, auto, ancillaries, cement, engineering and textiles. Several macro-economic variables have bounced back over the past few months. Inflation (CPI) is on the decline, interest rate cuts have commenced, GDP growth is increasing and IIP figures are looking up.

Expanding order books of engineering companies, improving utilisation in cement companies and a steady rise in passenger car vehicle sales are some of the factors playing out over the past two-three quarters.

Betting on growth

The broad themes are, therefore, domestic consumption, exports and import substitution within the manufacturing ambit. The Government, through its ordinances in coal mining, insurance FDI, promise of faster clearance to projects, the likely passage of the GST Bill and the thrust on ‘Make In India’ is likely to get corporate investments and profitability back on track. Planned projects such as the bullet train, elevated freight corridor, building of smart cities and power reforms are likely to benefit a host of companies in these sectors.

Additionally, Birla Sun Life Manufacturing Equity is also looking to bet on pharma and electronics sectors, while JP Morgan Economic resurgence is looking to add financials as well.

Illustrating the impact all these measures will have on corporate India, a report from Motilal Oswal Securities states that earnings for Sensex companies are likely to grow at a compounded annual rate of 18.5 per cent over FY14-17.

Should you invest?

These two schemes do provide interesting themes to bet on in the current scenario.

Since the bets are on heavily cyclical segments and both schemes are likely to have a multi-cap focus as well, risk levels are a bit higher.

These are, hence, suitable only for high-risk investors. For those investors who wish to gain from what may well be a multi-year rally for cyclical segments, but cannot choose the best stocks to bet on, these schemes provide an alternative.

But there are already many existing schemes focused on infrastructure and allied segments such as Franklin Build India and DSPBR T.I.G.E.R. The former, which invests in a whole host of segments that are dependent on the India growth story, has a proven record to go by and may be a safer alternative.

If you do want to take the plunge in these new offers, park only small sums in these schemes to act as a diversifier. These funds being open-ended, you can exit them any time.

Published on January 24, 2015

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