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Infrastructure plays a pivotal role in a country's growth. Recognising this, over the last few years, the government has laid special emphasis on the growth of infrastructure with projects such as Gati Shakti, the National Monetization Plan, and the National Infrastructure Pipeline.
Under these projects, the government has undertaken various initiatives such as Bharatmala, Sagarmala, Smart City Mission, Housing For All, as well as the development of new railways, airports, and metros, plus consciously ensured higher capex outlays.
India's infrastructure budget for FY25 is Rs 11.11 trillion, which is 3.4% of the country's GDP. This is a record amount and is unchanged from the interim budget presented in February 2024
Moreover, the government is encouraging Public Private Partnerships (PPP) and extended the Production Linked Incentive (PLI) scheme for domestic manufacturing which is critical to accelerating infrastructure development.
Rapid urbanisation is resulting in the construction of roads, bridges, dams, railway lines, airports, renewal energy, telecommunication, housing projects, etc.
This is also benefitting infrastructure-related industries, such as banking & finance, engineering, cement, logistics, and steel, to name a few.
Besides, opportunities are emerging in digital infrastructure, renewable energy, and other innovative infrastructure solutions.
As an investor, if you too wish to benefit from the government's ambitious impetus to boost infrastructure, equity mutual funds can be your best bet.
[Read: 5 Equity Mutual Funds with Higher Exposure to Infrastructure Stocks]
To capitalise on the opportunities in the expanding infrastructure theme, Aditya Birla Sun Life Mutual Fund -- one of the country's top 10 fund houses by Average Assets Under Management -- has launched the Aditya Birla Sun Life BSE India Infrastructure Index Fund.
It is an open-ended Index Fund replicating the BSE India Infrastructure Total Return Index (TRI). In other words, the returns would commensurate with that of the underlying benchmark index, i.e. the BSE India Infrastructure TRI, subject to a tracking error.
During the NFO period, the Scheme is open for subscription from November 14, 2024, to November 28, 2024. Thereafter the scheme re-opens for subscription within 5 days from the date of allotment.
Under normal circumstances, the Scheme would allocate 95% to 100% of its total assets in equity & equity-related securities constituting the BSE India Infrastructure Index.
The Scheme may also invest up to 20% of its net assets in equity derivatives instruments.
That being said, the Scheme will be invested predominantly in stocks constituting the BSE India Infrastructure Total Return Index. This would be done by investing in the stocks comprising the index in approximately the same weightage they represent in the index or investing in derivatives including futures contracts on the said index.
The exposure to equity derivatives of constituents of the underlying Index would be taken for a short duration when securities of the Index are unavailable, insufficient or for rebalancing at the time of change in the Index or in case of corporate actions or for hedging purposes, as permitted by SEBI/RBI.
The Scheme may engage in Securities Lending not exceeding 20% of the net assets of the Scheme and shall not lend more than 5% of its net assets to a single intermediary.
Up to 5% of the fund's total assets would be held in debt & money market instruments (including cash and cash equivalents.
Money Market Instruments include commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity of up to one year, call or notice money, certificate of deposit, usance bills, Tri-party Repo on Government securities or treasury bills (TREPS) and any other like instruments as specified by the Reserve Bank of India from time to time.
The Scheme will invest in the debt instruments having Structured Obligations (SOs) / Credit Enhancements (CEs) up to 5% of the net assets of the Scheme.
To meet liquidity requirements, the Scheme may invest in units of money market/liquid schemes of Aditya Birla Sun Life Mutual Fund and/or any other mutual fund provided that aggregate inter-scheme investment made by all schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund.
The Scheme will not invest in the following:
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Repo /reverse repo in corporate debt securities
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Instruments having special features
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Securitised Debt
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Unrated debt instruments
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Credit Default Swaps (CDS)
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REITs and InVITs
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Overseas securities/ADRs/GDRs
Further, the Scheme will not engage in short selling.
Note, although Aditya Birla Sun Life Index Fund is an open-ended Index Fund tracking the BSE India Infrastructure TRI, the fund manager would not be able to invest the entire corpus exactly in the same proportion as in the underlying index due to certain factors such as the fees and expenses of the Scheme, corporate actions, cash balance and changes to the underlying index and regulatory restrictions, lack of liquidity which may result in tracking error.
Tracking errors are inherent in any index fund and such errors may cause the scheme to generate returns which are not in line with the performance of the underlying index - in this case, the BSE India Infrastructure TRI.
The AMC would monitor the tracking error of the Scheme on an ongoing basis and would seek to minimize tracking error to the maximum extent possible. Under normal circumstances, such tracking errors are not expected to exceed 2% per annum.
In case of unavoidable circumstances like a force majeure, which are beyond the control of the AMCs, the tracking error may exceed 2% and the same shall be brought to the notice of Trustees with corrective actions taken by the AMC, if any.
What is the Investment Objective?
The investment objective of the Scheme is to provide returns that, before expenses, correspond to the total returns of securities as represented by the BSE India Infrastructure Total Return Index, subject to tracking errors.
The Scheme does not guarantee/indicate any returns. There is no assurance or guarantee that the investment objective of the Scheme will be achieved.
What Is the Investment Strategy?
In the endeavour to achieve the stated investment objective, Aditya Birla Sun Life BSE India Index Fund will follow a passive investment strategy and will invest not less than 95% of its corpus in stocks comprising the underlying index and endeavour to track the benchmark index while minimizing the tracking error.
The investment strategy would revolve around reducing the tracking error to the least possible through regular rebalancing of the portfolio, taking into account the change in weights of stocks in the index as well as the incremental collections/redemptions in the Scheme.
The AMC does not make any judgments about the investment merit of the BSE India Infrastructure Total Return Index, nor will it attempt to apply any economic, financial or market analysis.
The Scheme may also invest in cash/cash equivalent and debt/ money market instruments including units of Liquid schemes, in compliance with Regulations to meet liquidity and expense requirements.
The performance of the Scheme will be benchmarked to the performance of the BSE India Infrastructure Total Return Index.
About the BSE India Infrastructure Index
The BSE India Infrastructure Index (launched on May 19, 2014, with a base date of April 3, 2006) is designed to measure the performance of the top 30 Indian companies involved in infrastructure and related operations that meet investability requirements.
The index is designed to measure the performance of Indian infrastructure companies within the BSE All Cap. Stocks with a listing history of at least 6 months and common India industry classification Structure basic industry with 5 clusters categorized as energy, NBFCs, construction & engineering, transportation & utilities are eligible.
This index is computed using a modified market cap-weighted methodology with a base date of April 3, 2006, and is rebalanced semi-annually (in March and September).
At present, the top 10 constituents of this index are as under, and they constitute 64.3% of the portfolio.
Table: Top 10 Constituents of BSE India Infrastructure Index
(Source: BSE India Infrastructure Index Factsheet as of October 31, 2024)
In the last one year, the BSE India Infrastructure Index has clocked an appealing price return and total returns and outperformed the BSE 500 TRI
Graph: The BSE India Infrastructure Index Has Delivered Solid Returns in the Last Decade
Index values rebased to 100
BSE Historical Data
Past Performance may or may not be sustained in the future
Data from January 1, 2014, to October 22, 2024
(Source: Aditya Birla Sun Life Mutual Fund's investor presentation)
On a longer investment horizon as well, this index has rewarded investors well.
Here's what A. Balasubramanian, Managing Director & CEO, of Aditya Birla Sun Life AMC Ltd., said in a press release on the launch of Aditya Birla Sun Life Infrastructure Index Fund:
"India's infrastructure sector presents a transformative opportunity for investors to align with India's growth story. With the government's strong focus and commitment to infrastructure, coupled with favourable demographics and rising domestic consumption, the sector is poised to be a critical driver of India's economic growth. As we advance towards the Amrit Kaal 2047 vision, sectors like energy, construction & engineering, transportation and utilities will play pivotal roles in shaping India's journey to becoming a developed economy. Also, the BSE India Infrastructure Index has a wider representation of stocks/sub-sectors within the infra space."
Who Will Manage Aditya Birla Sun Life Infrastructure Index Fund?
Rupesh Gurav is the designated Fund Manager of the Scheme.
He has an overall experience of around 18 years in the mutual fund industry. He joined Aditya Birla Sun Life AMC Ltd. (ABSLAMC) in 2014 and was part of the Operations - Trades and Settlements Department. Before joining the ABSLAMC, he was associated with Citi Bank N.A. and Sahara Asset Management Company Private Limited.
Currently, Rupesh is not managing other schemes at the fund house. He is a commerce graduate (B.Com).
How much is the Minimum Investment in Aditya Birla Sun Life Infrastructure Index Fund?
During the NFO period and ongoing/continuous basis, the minimum investment in the Scheme is Rs 500/- and in multiples of Rs 100/- thereafter.
Investors have the option of a monthly Systematic Investment Plan (SIP) and weekly SIP. For monthly and weekly Systematic Investment Plan SIP, the minimum is Rs 500/- and in multiples of Re. 1/- thereafter.
[Read: Why Discontinuing/Pausing Your SIPs Isn't the Best Move in a Volatile Market]
Both, the Direct Plan and Regular Plan for available for investments plus the options available are Growth and Income Distribution cum Capital Withdrawal (IDCW).
Who Should Consider Aditya Birla Sun Life Infrastructure Index Fund?
Investors looking to participate in India's growth story with emphasis on investment in the infrastructure theme, want to gain diversified exposure to the infrastructure theme with a low-cost index fund, and want long-term capital appreciation by reaping the benefits of passive investing could consider Aditya Birla Sun Life Infrastructure Index Fund.
That said, the fortune of the Scheme will be closely linked with the performance of the underlying index. In other words, the returns would closely commensurate with that of the underlying index and there will be concentration risk.
After the recent correction in the Indian equity market since the peak, the trail Price-to-Equity (P/E) ratio of the BSE India Infrastructure Index has also come down to around 18x from the peak of 26x. The Price-to-Book Value (P/BV) ratio of this index has also reduced a bit to around 3x from the peak.
However, a fact is that the Indian is that Indian equities, by and large, are commanding a premium compared to global peers. If the market corrects, it could weigh on the BSE India Infrastructure Index as well.
Given the market risk involved due to geopolitical and economic uncertainty, it is not a very conducive environment to take sector-specific concentration risk at the moment.
Be a thoughtful investor.
To learn more about the Aditya Birla Sun Life Infrastructure Index Fund, read the Scheme Information Document and Key Information Memorandum.
Happy Investing!