While market volatility is keeping investors away, fund houses have identified infrastructure as the new bet to lure them, says Deepak Ranjan Patra
When a country’s finance minister enhances allocation to urban infrastructure by a mind-boggling 87% to Rs.12,887 crore with a promise that infrastructure investments will be further increased to more than 9% of the GDP in next five years, you definitely need no rocket science to find out which sector will make it to the top of the investors’ minds. Yes, infrastructure is hot today in India and no one wants to miss this clear opportunity to make some moolah. So, how could the mutual fund industry stay sideway? Almost all Asset Management Companies (AMCs) have geared up to this infra-growth. Asserts R. K. Gupta, MD, Taurus Mutual Fund, “In coming six months you will see all fund houses having their own infra funds dedicated to the sector.” But the question remains, are these AMCs really hoping to offer a good return to the investors or are they just trying to skim the market when the buzz is still heavy?
Bandeep Singh Ranger, Chairman, IndusView avers, “Finance Minister’s commitment to increase investments in the infrastructure sector to more than 9% of the GDP by 2014 from 5% currently and other rural development and welfare programs opens scope for investment opportunities.” Moreover, Finance Minister’s inclination towards Public Private Partnership clears ground for the private players to avail a cool share in the returns to be generated. This combined with the fact that India is now considered as the preferred destination for doing business among the emerging BRIC countries (World Bank Report titled ‘Doing business 2009’) makes it a point worth mentioning that the sector may also see some foreign investments flowing in. Considering the expectations, possibilities, “the sector will now become hotter than ever,” claims Vinayak Banarjee, Chairman, Feedback Ventures.
However, AMCs’ rendezvous with the infrastructure companies is nothing new. Infra stocks always have been a part of different mutual fund schemes for the simple fact that majority of the BSE 500 companies belong to the domain. As a matter of fact, stocks of infra-based companies form a large portion of many of the diversified equity funds. The only new thing about the current trend is that this time around the AMCs are coming up with sector specific infra funds like ‘Reliance Infrastructure fund’ launched by Reliance Mutual Fund promising to invest in infrastructure and infrastructure related companies only. The fund managers too seem upbeat on the returns as Sundeep Sikka, CEO, Reliance Capital Asset Management told to media during launch of the new fund, “Undoubtedly, infrastructure is a key priority for India and we also hope a spurt of infrastructure spending in the economy on the back of the stable government and ease of project financing. Moreover, the valuation looks more attractive. The right time is now to invest in infrastructure and infrastructure-related firms.”
Explaining the prevailing bullishness in the sector R. K. Gupta explains, “Over the last two years other sectors are by and large flat or downward. The only good sector available is infrastructure. Moreover, it’s at a poor level in the country and government can’t survive without taking to higher levels. That means there is a better future in the sector with ample opportunities.” Perhaps that’s why Gupta feels that almost every fund house will soon have some infra-related funds in their portfolio. But the question is what impact will this flurry of infra funds have on the investors? Well, a lot of confusion as to which fund to chose.
Definitely it’s a tough time for the retail investors. While the abrupt volatility at the stock market is pulling them from entering into the market, launch of a number of infra-based funds are giving their investment strategy a tough time in case of mutual funds. The most common advice given by analysts at the moment is to go for existing funds with proven track records rather than jumping into the NFO bandwagon. The very basic reason for the same is that most of the new funds are typical sector funds, where the constituents are associated with similar type of risk that is attached to the sector. For the same, such funds often lack proper defensive stocks ending up as high-risk investments. In fact, the risk quotient associated with infrastructure sector as such is more than many others. That’s why, it’s time when investors need to be a little meticulous in their approach even though they know that infrastructure is the next big thing for them.
Deepak Ranjan Patra
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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When a country’s finance minister enhances allocation to urban infrastructure by a mind-boggling 87% to Rs.12,887 crore with a promise that infrastructure investments will be further increased to more than 9% of the GDP in next five years, you definitely need no rocket science to find out which sector will make it to the top of the investors’ minds. Yes, infrastructure is hot today in India and no one wants to miss this clear opportunity to make some moolah. So, how could the mutual fund industry stay sideway? Almost all Asset Management Companies (AMCs) have geared up to this infra-growth. Asserts R. K. Gupta, MD, Taurus Mutual Fund, “In coming six months you will see all fund houses having their own infra funds dedicated to the sector.” But the question remains, are these AMCs really hoping to offer a good return to the investors or are they just trying to skim the market when the buzz is still heavy?
Bandeep Singh Ranger, Chairman, IndusView avers, “Finance Minister’s commitment to increase investments in the infrastructure sector to more than 9% of the GDP by 2014 from 5% currently and other rural development and welfare programs opens scope for investment opportunities.” Moreover, Finance Minister’s inclination towards Public Private Partnership clears ground for the private players to avail a cool share in the returns to be generated. This combined with the fact that India is now considered as the preferred destination for doing business among the emerging BRIC countries (World Bank Report titled ‘Doing business 2009’) makes it a point worth mentioning that the sector may also see some foreign investments flowing in. Considering the expectations, possibilities, “the sector will now become hotter than ever,” claims Vinayak Banarjee, Chairman, Feedback Ventures.
However, AMCs’ rendezvous with the infrastructure companies is nothing new. Infra stocks always have been a part of different mutual fund schemes for the simple fact that majority of the BSE 500 companies belong to the domain. As a matter of fact, stocks of infra-based companies form a large portion of many of the diversified equity funds. The only new thing about the current trend is that this time around the AMCs are coming up with sector specific infra funds like ‘Reliance Infrastructure fund’ launched by Reliance Mutual Fund promising to invest in infrastructure and infrastructure related companies only. The fund managers too seem upbeat on the returns as Sundeep Sikka, CEO, Reliance Capital Asset Management told to media during launch of the new fund, “Undoubtedly, infrastructure is a key priority for India and we also hope a spurt of infrastructure spending in the economy on the back of the stable government and ease of project financing. Moreover, the valuation looks more attractive. The right time is now to invest in infrastructure and infrastructure-related firms.”
Explaining the prevailing bullishness in the sector R. K. Gupta explains, “Over the last two years other sectors are by and large flat or downward. The only good sector available is infrastructure. Moreover, it’s at a poor level in the country and government can’t survive without taking to higher levels. That means there is a better future in the sector with ample opportunities.” Perhaps that’s why Gupta feels that almost every fund house will soon have some infra-related funds in their portfolio. But the question is what impact will this flurry of infra funds have on the investors? Well, a lot of confusion as to which fund to chose.
Definitely it’s a tough time for the retail investors. While the abrupt volatility at the stock market is pulling them from entering into the market, launch of a number of infra-based funds are giving their investment strategy a tough time in case of mutual funds. The most common advice given by analysts at the moment is to go for existing funds with proven track records rather than jumping into the NFO bandwagon. The very basic reason for the same is that most of the new funds are typical sector funds, where the constituents are associated with similar type of risk that is attached to the sector. For the same, such funds often lack proper defensive stocks ending up as high-risk investments. In fact, the risk quotient associated with infrastructure sector as such is more than many others. That’s why, it’s time when investors need to be a little meticulous in their approach even though they know that infrastructure is the next big thing for them.
Deepak Ranjan Patra
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Management guru Arindam Chaudhuri’s latest blockbuster book, Discover The Diamond In You
IIPM fights meltdown, places 2300 students By Education Mail Bureau
Delhi/ NCR B- Schools get better By Swati Sharma
Events at IIPM
Detail of all IIPM branches
IIPM set to beat economic slowdown
IIPM - Admission Procedure
IIPM, GURGAON
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