Investing
manufacturing fund
Make in India
Manufacturing mutual fund
A Manufacturing mutual fund is a thematic equity scheme that invests at least 80 per cent of its corpus in manufacturing-themed companies including industrials, capital goods, defence, electronics, automotive, and related sectors. The category was popularised in the 2020-2024 period reflecting the Make in India and Production-Linked Incentive (PLI) scheme tailwinds driving Indian manufacturing capex.
For Indian retail investors, manufacturing mutual funds offer:
- Make in India tailwind: Government-driven manufacturing push.
- PLI scheme beneficiaries: Across electronics, pharma APIs, autos, etc.
- Diversified manufacturing exposure: Industrials + capital goods + autos + defence.
- Cyclical opportunity: Indian manufacturing capex revival.
Major manufacturing funds
- ICICI Prudential Manufacturing Fund: One of the early entrants in the category.
- Aditya Birla Sun Life Manufacturing Equity Fund.
- Kotak Manufacture in India Fund.
- HDFC Defence Fund: Focused on defence manufacturing subset.
- Tata Indian Industrials Fund.
Many of these were launched 2020-2023 to capture the Make in India theme.
Investment universe
Manufacturing funds invest across:
- Capital goods: L&T, Siemens, ABB, Cummins, Thermax.
- Defence: HAL, BEL, Bharat Dynamics, Mazagon Dock.
- Auto and auto components: Maruti Suzuki, Bajaj Auto, Hero MotoCorp, Tata Motors, M&M.
- Auto ancillaries: Bosch, Sona BLW, Endurance Technologies, Suprajit Engineering.
- Electronics manufacturing: Dixon Technologies, Amber Enterprises.
- Specialty chemicals: Pidilite, SRF, Atul, Aarti Industries.
- API and pharma: Aurobindo, Divi’s Labs, Granules India.
- Industrials/equipment: Bharat Heavy Electricals, BEML.
Make in India and PLI tailwinds
The Indian government’s Make in India initiative and PLI scheme provide structural tailwinds:
- PLI Schemes: 14+ sectors covered including electronics, pharma APIs, auto, telecom, textiles, food processing.
- PLI scheme size: Multi-lakh-crore commitment.
- Manufacturing FDI: Foreign manufacturing investment inflows.
- Export competitiveness: Indian manufacturing increasingly competitive globally.
Comparison with infrastructure funds
| Dimension | Manufacturing Fund | Infrastructure Fund |
|---|---|---|
| Focus | Manufacturing production | Infrastructure construction/projects |
| Major holdings | Capital goods + auto + defence | Construction + cement + power |
| Cyclical drivers | Capex + consumer demand | Government infrastructure spending |
| Overlap | Some (capital goods) | Some (capital goods) |
Tax treatment
Manufacturing mutual funds are equity-oriented :
- LTCG (>12 months): 12.5 per cent above Rs 1.25 lakh annual exemption under Section 112A .
- STCG (≤12 months): 20 per cent under Section 111A .
Risks
- Cyclical risk: Manufacturing capex can reverse with economic cycles.
- Global slowdown: Affecting exports.
- Policy risk: PLI scheme changes or sunsetting.
- Sectoral concentration: Single-sector exposure.
Role in portfolios
Manufacturing funds suit:
- Make in India structural play: Long-term thematic allocation.
- Capex-cycle tactical positioning: 5-10 per cent during favorable cycles.
- Defence-themed allocation: Within manufacturing fund (some focused on defence subset).
See also
- Mutual funds in India
- Sectoral and Thematic Mutual Fund
- Infrastructure Fund
- Banking Financial Services Fund
- Energy Fund
- PSU Fund
- Technology Fund
- Pharma Healthcare Fund
- Equity mutual fund taxation in India
External references
References
- SEBI October 2017 categorisation circular.
- SEBI (Mutual Funds) Regulations 1996.
- AMFI scheme data on manufacturing funds.