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India's manufacturing sector contributes around 17% of its GDP and is expected to grow to 21% in the next 6-7 years. With the government's "Make in India", Production Linked Incentive (PLI) scheme (with an outlay of Rs 1.97 lakh crore) to enhance the country's manufacturing capabilities and exports, a significant increase in Foreign Direct Investments (FDI) in the manufacturing sector over the last decade, India's China +1 strategy, and the emphasis on Aatmanirbhar Bharat (self-reliant India) spotlights have turned on the manufacturing sector. India has a huge opportunity to become a 'Global Manufacturing Hub' in this decade.
Not wanting to miss the bus, a slew of mutual fund houses in the recent past have launched Manufacturing Funds. Baroda BNP Mutual Fund, too, has launched the Baroda BNP Paribas Manufacturing Fund. During the NFO period, this Scheme is available at Rs 10/- per unit until the scheme closes for subscription on June 24, 2024 (before it re-opens within 5 business days from the date of allotment).
It is an open-ended equity scheme predominantly investing in the Manufacturing theme targeting long-term capital growth by investing mainly in equity and equity-related securities of companies engaged in the manufacturing theme.
What are Manufacturing Funds?
Manufacturing mutual funds are thematic mutual funds. As per SEBI, thematic mutual funds need to invest a minimum of 80% of their total assets in equity and equity-related instruments of companies belonging to a particular theme.
That said, they have the flexibility to invest across the market cap range, i.e. large-cap, mid-cap, and small-cap companies in the manufacturing space.
What is the Investment Objective of Baroda BNP Paribas Manufacturing Fund?
The investment objective is to generate long-term capital appreciation from a portfolio invested predominantly in equity and equity-related securities of companies engaged in Manufacturing. The Scheme does not guarantee/indicate any returns. There is no assurance that the investment objective of the Scheme will be achieved.
How Will Baroda BNP Paribas Manufacturing Fund Allocate its Assets?
Under normal circumstances, 80%-100% of the assets of the Scheme will be invested in equity and equity-related instruments of companies in the manufacturing theme. Up to 20% may be in equity & equity-related instruments other than the manufacturing theme.
The scheme may also invest up to 50% of equity assets in equity derivatives instruments as permitted under the SEBI (Mutual Funds) Regulations, 1996 from time to time.
Further, the Scheme may invest in foreign securities (including ADR / GDR) up to 20% of the net equity assets.
Further, up to 10% each will be units of domestic mutual fund schemes and REITs and InvITs.
Also, for liquidity needs and defensive consideration up to 20% could be held in debt and money market instruments (including securitised debt),
The Scheme retains the flexibility to invest across all the securities in the equity, debt, money markets instruments, units issued by REITs & InvITs and mutual fund units.
However, the Scheme will not invest in foreign debt securities (including foreign securitized debt), debt derivative instruments (including Credit Default Swaps), and debt instruments having credit enhancements.
The Investment Strategy of Baroda BNP Paribas Manufacturing Fund
To achieve the stated investment objective, the Scheme mainly aims to invest in listed companies that manufacture goods and that have/will have manufacturing facilities. So, the portfolio seeks to invest in companies that:
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- Directly engage in manufacturing activity
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- Seek to replace India's imports by manufacturing in India
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- Export goods manufactured in India
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- Invest in new manufacturing plants/facilities
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- Aid manufacturing of new-age technology solutions
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- Allied services associated with the entire manufacturing lifecycle
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- Companies listed in India and having manufacturing facilities outside India or vice versa
The companies forming part of eligible basic industries based on AMFI classification (or other applicable extant classification guidelines), as updated from time to time, that broadly represent the manufacturing sector would also form a part of this Scheme.
While building the equity portfolio of Baroda BNP Paribas Manufacturing Fund, the following parameters will be taken into consideration:
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Business and economic fundamentals driven by in-depth research
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Reputation of the management and track record
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Long-term growth prospects
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The financial strength of the companies, as indicated by well-recognised financial parameters employing strong stock selection valuation parameters
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Any other factor affecting the company's business prospects
As cited before, the fund manager may at his discretion invest up to 20% of the scheme assets outside the manufacturing theme based on his assessment of the investment opportunities.
Since investing requires disciplined risk management, the fund house would incorporate adequate safeguards for controlling risks in the portfolio construction process. While allocating and choosing securities, the investment manager will aim to diversify by gaining broad exposure to different industries and companies to reduce risk.
Also, as a part of the investment process, the Scheme will rebalance and churn the portfolio as and when needed.
How Will Baroda BNP Paribas Manufacturing Fund Benchmark Its Performance?
The Scheme will benchmark its performance against the Nifty India Manufacturing TRI (Total Return Index).
The stocks in the Nifty India Manufacturing Index are selected from a combined universe of Nifty 100, Nifty Midcap 150 and Nifty Smallcap 50 index. This index is a fair representation of the portfolio holdings and universe of investment for the scheme.
The Nifty India Manufacturing Index has he base date of April 1, 2005, and since inception has clocked a respectable 'total return' of 16.1% CAGR.
Who Will Manage Baroda BNP Paribas Manufacturing Fund?
Mr. Jitendra Sriram is the designated fund manager for Baroda BNP Paribas Manufacturing Fund. He has over 26 years of experience and his with Baroda BNP Mutual Fund since June 2022.
Before that, he was with Prabhudas Lilladhar Portfolio Management Services as Senior Vice President - Equity Fund Management and has worked with various other companies viz., Max Life Insurance Company Private Limited, HSBC Securities & Capital Markets (India) Private Limited, and HSBC Asset Management (India) Private Limited. He holds a bachelor's degree in electrical and electronics engineering (B.E. - Electrical and Electronics) and an MBA (Finance). He manages many other schemes at Baroda BNP Mutual Fund.
Mr. Miten Vora will be the dedicated fund manager of the Scheme. He has more than 14 years of overall experience since November 2022. Before that, he was with Canara HSBC Oriental Bank of Commerce Life Insurance Company, BNP Paribas Investment Partners, IDBI Asset Management Ltd., and Antique Stock Broking Ltd. He holds a PGDM in finance from ICFAI, Hyderabad. He also is the fund manager for overseas investments for numerous other schemes of Baroda BNP Mutual Fund.
On the launch of Baroda BNP Paribas Manufacturing Fund, Mr. Suresh Soni, CEO of Baroda BNP Paribas Mutual Fund, said:
"We are thrilled to launch the Baroda BNP Paribas Manufacturing Fund. The scheme offers a compelling investment opportunity as the manufacturing sector is poised for multi-decade growth fuelled by growing consumption, investments, exports, changing geopolitical dynamics, and favourable government policy."
Who Should Invest in Baroda BNP Paribas Manufacturing Fund?
Investors looking to participate in India's manufacturing story can consider BNP Paribas Manufacturing Fund with some tactical allocation. That said, one needs to have the stomach for very high risk (given that is a sector/thematic fund) and an investment time horizon of at least 5 years or more.
What Is the Minimum Investment in Baroda BNP Paribas Manufacturing Fund?
During the New Fund Offer period (from June 10, 2024, to June 24, 2024), the minimum investment is Rs 1,000/- and in multiples of Re 1/- thereafter.
Investors also have the Systematic Investment Plan (SIP) route, wherein for daily, weekly, and monthly SIPs the minimum investment amount is Rs 500/-, while for quarterly SIPs Rs 1,500/- and in multiples of Re 1/- thereafter.
There is no upper limit on the amount for application. Your investment can be made either in the Regular Plan or Direct Plan.
To know more about Baroda BNP Paribas Manufacturing Fund, download and read the Scheme Information Document and Key Information Memorandum.
When adding mutual fund schemes to your portfolio consider your risk profile, broader investment objective, the financial goals you wish to address and time in hand to achieve those envisioned goals to make a prudent and suitable choice rather than investing in schemes in an ad hoc manner.
Be a thoughtful investor.
Happy Investing!