ABSL Manufacturing Equity Fund: Find Out If You Need It in Your Portfolio

ABSL Manufacturing Equity Fund: Overview

The Aditya Birla Sun Life Manufacturing Equity Fund is an open-ended equity mutual fund dedicated to investing in companies within the manufacturing sector.

This thematic fund seeks to capitalize on the growth potential driven by various government initiatives like the “Make in India” campaign and Production-Linked Incentives (PLI).

Since its launch, this scheme has generated 13.13% returns while showing great progress in the long term. With a strong AUM (asset under management) at Rs.1108 Crores and back support from an established AMC, it has a promising future ahead. 

In this article, we will closely look at the fundamentals of this scheme.

ABSL Manufacturing Equity Fund Details

• Launch Date:01.2015
• Current NAV: ₹32.14 (as of July 24, 2024)
• Minimum Investment: ₹1,000 for initial investments; ₹100 for SIPs
• Expense Ratio: Not specified
• Exit Load: 1% if redeemed within 90 days
• Risk Level: High

The fund’s strategy focuses on achieving long-term capital appreciation by investing at least 80% of its net assets in equities of manufacturing companies. The remaining assets can be invested in cash, money market instruments, or debt securities to manage liquidity.

What is the ABSL Manufacturing Equity Fund’s Performance?

The ABSL Manufacturing Equity Fund’s performance is evaluated across various periods:

• 1-Year Return:80%
• 3-Year Return:30%
• 5-Year Return:90%

Let us compare the returns at different intervals with the category average returns:

• Category Average (1-Year):20%
• Category Average (3-Year):60%

The fund has shown competitive returns, particularly over the past year, indicating a strong performance relative to its category peers.

How is the Portfolio Composition of ABSL Manufacturing Equity Fund Has Been?

The Aditya Birla Sun Life Manufacturing Equity Fund maintains a diversified portfolio across various sectors within manufacturing. Key holdings include:

• Reliance Industries Ltd.:66%
• Bharat Electronics Ltd.:29%
• Larsen & Toubro Ltd.:73%
• Century Textiles & Industries Ltd.:00%
• Cummins India Ltd.:90%

The fund has significant allocations to large-cap and mid-cap stocks, with approximately 95.85% of its assets invested in domestic equities. This diversification helps mitigate risks associated with individual stocks while aiming for growth.

What is the Investment Rationale of ABSL Manufacturing Equity Fund?

Investing in the Aditya Birla Sun Life Manufacturing Equity Fund can be suitable for various investor types:

1. Long-Term Growth: Ideal for investors seeking long-term capital appreciation with a horizon of five years or more. The fund’s focus on manufacturing companies aligns with India’s economic policies aimed at boosting output and exports.
2. Thematic Exposure: The fund offers focused exposure to the manufacturing sector, benefiting from initiatives like “Make in India” and PLI. This sector is poised for growth due to supportive government policies and increasing industrial activity.
3. Expert Management: Managed by experienced professionals, the fund employs rigorous analysis to select stocks based on growth potential, financial health, and market conditions. This expert management is crucial for navigating the complexities of the manufacturing sector.
4. Accessibility: With a low minimum investment requirement, the fund is accessible to a wide range of investors, including those new to equity investments. This makes it easier for investors to diversify their portfolios with thematic exposure.

What are the Risks and Considerations for ABSL Manufacturing Equity Fund?

While the ABSL Manufacturing Equity Fund offers growth opportunities, it also carries inherent risks:

1. Market Volatility: As an equity fund, it is subject to market fluctuations that can lead to significant price changes in the short term. Investors should be prepared for potential volatility.
2. Sector Concentration: Thematic funds are closely tied to their respective sectors. Economic downturns or challenges specific to the manufacturing sector can adversely affect returns.
3. Liquidity Risks: Although the fund maintains a portion of its assets in cash and money market instruments, liquidity can still be a concern, especially in volatile market conditions.

Who Should Invest in ABSL Manufacturing Equity Fund?

Long-Term Investors

• Ideal for those with an investment horizon of five years or more.
• Aims for long-term capital appreciation through investments in the manufacturing sector.

Investors Seeking Thematic Exposure

• Suitable for individuals looking to capitalize on the growth potential of India’s manufacturing sector.
• Benefits from government initiatives like “Make in India” and Production-Linked Incentives (PLI).

High-Risk Tolerant Investors

• Appropriate for investors who can handle high market volatility and sector-specific risks.
• Small-cap and mid-cap stocks can experience significant price fluctuations.

Diversification Seekers

• Good for investors wanting to diversify their portfolio with a focused investment in the manufacturing sector.
• Complements other equity investments in large-cap or diversified funds.

SIP Investors

• Accessible to investors preferring Systematic Investment Plans (SIPs) with a low minimum investment requirement.
• Allows gradual investment and mitigates the impact of market volatility over time.

Those Seeking Professional Management

• Managed by experienced professionals who conduct rigorous analysis to select growth-oriented stocks.
• Investors benefit from the expertise and strategic insights of fund managers.

Investors Aligning with Economic Trends

• For those who believe in the positive long-term outlook of India’s manufacturing industry.
• Aligns investments with macroeconomic policies and industrial growth trends.

Before investing, it’s advisable to consult with a financial advisor to ensure the fund aligns with your financial goals, risk tolerance, and overall investment strategy.

Conclusion

The Aditya Birla Sun Life Manufacturing Equity Fund offers a compelling option for investors seeking exposure to India’s manufacturing sector. Being a smart investor, SIP is the best way to include this stock in your portfolio.

With a robust recent performance, a diversified portfolio, and the backing of experienced fund management, it can be a valuable addition for those with a long-term investment horizon and a tolerance for risk.

Potential investors should carefully assess their financial goals, risk appetite, and overall portfolio composition before investing. Consulting with a financial advisor can also help determine if this fund aligns with individual investment strategies.

Additional Insights: ABSL Manufacturing Equity Fund

Government Initiatives: The “Make in India” campaign and PLI schemes are significant drivers of growth in the manufacturing sector.

These initiatives aim to boost domestic production and exports, providing a favourable environment for manufacturing companies.

• Economic Indicators: Keep an eye on key economic indicators such as industrial production, GDP growth, and policy changes that can impact the manufacturing sector’s performance.
• Global Trends: Global economic conditions and trade policies can also influence the performance of manufacturing companies. Monitoring these trends can provide additional context for investment decisions.

By understanding these aspects, investors can make more informed decisions about whether the Aditya Birla Sun Life Manufacturing Equity Fund is the right fit for their portfolios.