HDFC Manufacturing Fund

Today in Fund Focus, we will delve into the dynamics of India’s manufacturing landscape explore the objective of HDFC’s manufacturing theme fund, and uncover why you need to consider adding this to your portfolio.

What is this fund all about?

This is a thematic fund that invests predominantly in companies engaged in the manufacturing sector. The manufacturing sector includes industries that create goods using raw materials, machinery, and labor. Examples of manufacturing industries include automobiles, chemicals, textiles, metals, pharmaceuticals, and electronics.

Why the manufacturing sector?

India has become a big player in manufacturing, and the proof is clear for all to see. Currently, manufacturing contributes 15% to GDP; it needs to exceed 20% for India to reach a $5 trillion economy in 4 years and $10 trillion in 10 years.

By FY30, India’s nominal GDP may double to $7 trillion, with manufacturing GVA growing nearly threefold. Overall exports are expected to double by 2030, with merchandise exports growing 2.6 times, highlighting manufacturing’s importance.

One compelling example is the transformation of the mobile phone industry, which was previously heavily dependent on imports. Through initiatives such as the PLI schemes, India has nurtured a thriving local manufacturing ecosystem. 

This has led to a significant jump in India’s global ranking for mobile phone exports, from 178th in FY 2016 to 5th in FY 2023. Notably, India’s contribution to Apple’s iPhone supply has surged, and it is expected to reach 25% within the next 2 to 3 years.

Manufacturing for various sectors can boost India’s economy

Is this the right time to invest? Why now?

  • The government’s drive for self-reliance through reforms and incentives, known as Atmanirbhar Bharat, is backed by a favorable macroeconomic environment. This includes increasing capital expenditure, low debt levels, and high capacity utilization. 
  • India has become a significant source of cost-effective labor globally, leading to a realignment of supply chains. As a result, high-value manufacturing is expected to grow rapidly.
  • India has some of the biggest automotive and pharmaceutical manufacturing industries worldwide. We’re expecting strong growth in electronic manufacturing and exports. With a large pool of skilled workers, cost advantages, and a focus on making things locally, India’s manufacturing scene is ready for huge growth in the next decade.
  • Convergence of Several Enablers to Provide Multi-Decadal Growth-

Who should invest in this fund?

  • Investors, who are looking at a 5 – 7 investment horizon.
  • Existing investors looking to increase portfolio returns 
  • First-time investors should not invest in this fund; – as it is a thematic fund, a one-time investment is preferable to a SIP.

Fund Details –

  • Fund Name –  HDFC Manufacturing Fund
  • Fund Manager – Mr. Rakesh Sethia, whose expertise and flexibility enable investments across market caps ensuring a diversified portfolio that captures opportunities across the manufacturing spectrum. 
  • NFO period – opens on the 26th of April 2024 and closes on the 10th of May 2024

HDFC manufacturing fund offers investors the strategic opportunity to tap into the diverse sector of India’s manufacturing landscape. With the commitment to investing at least 80% of the portfolio in manufacturing-related stocks, funds target companies’ choices to benefit from a variety of factors including government initiatives such as Make in India, import substitution strategies, and export-driven growth.

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