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Canara Robeco Manufacturing Fund NFO - Should you invest?

"Canara Robeco Manufacturing Fund: Investing in the future of manufacturing."

Canara Robeco Mutual Fund has launched a thematic fund NFO, the Canara Robeco Manufacturing Fund. This fund will focus on investing in companies across different manufacturing sectors, aligning with India's "Make in India" policy and benefiting from global supply chain shifts. The NFO is open for subscription from February 16 to March 1, 2024.

Significance of the Manufacturing Sector in India's Economic Expansion

Since the industrial revolution, manufacturing has been crucial for nations' progress. It drives employment and reduces income inequality. While China's growth was fueled by manufacturing, India's service sector dominates employment and GDP. However, manufacturing is vital for India's next growth phase, addressing external imbalances and demographic challenges like employment and a growing working-age population.

"Manufacturing industry gears symbolizing economic growth and development."
Source: World Bank

Factors Fueling Manufacturing Expansion in India

  • India has witnessed a significant increase in its per capita GDP, soaring from $500 in the early 1990s to over $2,000 in 2022. This milestone of $2,000 per capita income is often regarded as a turning point in a nation's economic advancement, as it signifies a rise in discretionary spending. Forecasts suggest that from this threshold, per capita income is anticipated to escalate at a rapid pace, reaching $4,700 by 2030, as reported by Canara Robeco MF.

"Graph depicting the rise of India's GDP per capita from $500 in the early 1990s to over $2,000 in 2022, with projections indicating growth to $4,700 by 2030."
Source: World Bank
  • India's expanding middle class is set to propel substantial consumption growth. By 2046-47, the combined population of the affluent and middle class is projected to exceed the current total population, driving significant demand for manufactured goods.

"Graph illustrating the projected growth of India's middle class and affluent population, surpassing the country's total population by 2046-47, leading to increased demand for goods and services."
Source: Canara Robeco, * At 2020-21 prices
  • Government policy reforms are pivotal in India's journey towards becoming a manufacturing hub.

  • Production Linked Incentive (PLI) Schemes have attracted over Rs. 1.03 lakh crore of investment as of November 2023. This has resulted in production/sales worth Rs. 8.61 lakh crore and generated over 6.78 lakh jobs (source: Ministry of Commerce).

  • Restructuring of labor laws has eased hiring and firing processes for firms, addressing concerns over restrictive labor laws and encouraging investments, particularly Foreign Direct Investments (FDI), in manufacturing sectors.

  • Corporate balance sheets are witnessing improvement due to ongoing deleveraging efforts over recent years.

  • India's globally competitive corporate tax structure is poised to attract foreign investments into the manufacturing sector.

  • The repositioning of global supply chains, exemplified by strategies like the "China + 1" approach, presents opportunities for India's manufacturing sector to thrive on a global scale.

Why Consider Investing in a Thematic Fund Focused on Manufacturing?

  • The manufacturing sector accounts for only 53% of the BSE 500 (as depicted in the chart below). A thematic fund specifically dedicated to manufacturing offers increased exposure to this sector, which is expected to be a vital component of India's growth trajectory.

"Graph depicting the significance of manufacturing in driving economic growth and development."
Source: S&P Global, as on 31st January 2024.

  • Investing in manufacturing as a theme has demonstrated superior performance compared to the broader market. The chart below illustrates the growth of a Rs 10,000 investment in S&P BSE India Manufacturing TRI versus BSE Sensex TRI over the past decade, ending on January 31, 2024. Manufacturing as a theme has consistently outperformed.

"Comparison graph showing the performance of S&P BSE India Manufacturing Total Return Index versus BSE Sensex Total Return Index over the past decade."
Source: S&P Global, as on 31st January 2024. Disclaimer: Past performance may or may not be sustained in the future

Key Highlights of the Canara Robeco Manufacturing Fund

Canara Robeco Manufacturing Fund – Key Features:

  • Portfolio Allocation: Minimum 80% allocation into Manufacturing & Allied Stocks.

  • Portfolio Concentration:

Diversified portfolio for optimal risk management.

  • Market Capitalization Bias:

Flexible allocation across market capitalization segments.

  • Investment Style:

Growth-oriented investment strategy.

  • Stock Selection:

Utilizes both Top-Down Overlay and Bottom-up Stock Selection approaches for robust stock picking.

"Chart illustrating the sectoral beneficiaries and strategy of the fund, highlighting its focus on manufacturing and allied sectors."

What Makes Canara Robeco Manufacturing Fund an Attractive Investment Opportunity?

Reasons to Consider Investing in Canara Robeco Manufacturing Fund:

  • Manufacturing's Vital Role: Manufacturing is set to be a cornerstone of India's future economic expansion, fueled by increasing prosperity, favorable demographics, macroeconomic tailwinds, and global supply chain realignments.

  • Government Initiatives: Government initiatives such as "Atmanirbhar Bharat" and "Make in India," coupled with other reforms and incentives, have enhanced the growth prospects of numerous manufacturing-focused sectors and companies.

  • Outperformance of Manufacturing Theme: Manufacturing as an investment theme has consistently outperformed the broader market, showcasing its resilience and potential for generating attractive returns.

  • Focus on Beneficiary Companies: The fund aims to invest in companies poised to benefit from growing domestic demand, favorable policy reforms, a robust private sector, and alternative supply chains.

  • Capitalizing on Opportunities: By capitalizing on emerging manufacturing trends and opportunities, the scheme aims to allocate investments across relevant sectors that embody the manufacturing theme.

For Whom is Canara Robeco Manufacturing Fund Suitable?

Who Should Consider Investing in Canara Robeco Manufacturing Fund:

  • Tactical Allocation Seekers: Investors interested in strategically allocating a portion of their equity portfolio to capitalize on opportunities within the manufacturing theme.

  • Long-Term Capital Appreciation: Individuals seeking capital appreciation over extended investment horizons from the potential growth of the manufacturing sector.

  • High Risk Tolerance: Investors with a very high tolerance for risk, considering the inherent volatility associated with equity investments, particularly thematic funds.

  • Long Investment Tenures: Those with a minimum investment horizon of 5+ years, aligning with the fund's objective of capturing long-term growth trends in the manufacturing sector.

  • Lumpsum or SIP Investors: Suitable for both lump sum and Systematic Investment Plan (SIP) investments, catering to various investment preferences and needs.

It's advisable for investors to consult with their financial advisors or mutual fund distributors to determine if Canara Robeco Manufacturing Fund aligns with their investment objectives and risk profiles.

"Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing."

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*Investors should consult their financial advisors if in doubt about whether the product is suitable for them Note: The above information has been sourced from the Scheme Information Document provided by Canara Robeco Asset Management. Read the entire document before investing, Disclaimer: Jaiprakash (ARN/Distributor - 70524; brand name Vasundhra Investment) is the distributor of the mutual fund. Please consult your investment advisor before investing

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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