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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.
Even the full budget 2024-25 of the Modi 3.0 government, has made the manufacturing sector among the budget priorities in the pursuit of ‘Viksit Bharat’ or developed India by 2047.
A credit guarantee scheme for the purchase of machinery and equipment without collateral or third-party guarantee is extended to Micro, Small & Medium Enterprises (MSMEs). Apart from mechanised machinery, there is also special attention towards labour-intensive manufacturing.
Furthermore, the budget 2024-25 has reduced custom duties on certain goods intended to support domestic manufacturing and deepen local value addition.
India has the opportunity to become the global manufacturing hub, and the structural reforms to encourage manufacturing in India are expected to increase the share of the manufacturing sector’s contribution to the GDP over the years from the current 17%.
[Read: Top 5 Mutual Funds That Are Betting on the Manufacturing Boom]
Graph 1: Manufacturing Sector expected to contribute significantly to India’s Economic Growth
(Source: Motilal Oswal Mutual Fund’s investor presentation)
Against this backdrop, mutual fund houses are also offering investors an opportunity to capitalise on India's dream of becoming the next 'factory of the world'.
Motilal Oswal Mutual Fund, not wanting to miss the bus, has launched Motilal Oswal Manufacturing Fund, a thematic equity fund following the manufacturing theme. During the NFO period, the scheme is open the Scheme is available for subscription from July 19, 2024, to August 2, 2024.
Note, 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.
Following these regulator guidelines, Motilal Oswal Manufacturing Fund will invest 80%-100% of its total assets in equity & equity-related instruments of companies engaged in manufacturing theme. These include foreign Securities including units of overseas mutual fund schemes/overseas ETFs having similar investment strategies and which form part of fund mandate up to 30% of equity net assets, subject to within overall limit for investment in foreign securities.
Up to 20% of the total assets the Scheme may invest in equity & equity-related instruments of other than the above companies.
The Scheme could also invest up to 10% of the total assets in units of REITs and InvITs. Also, may invest up to 5% of the total assets in units of mutual funds, including ETFs.
The allocation to debt and money market instruments (including cash and cash equivalents) can be up to 20% of the total assets of the Scheme.
What is the Investment Objective?
The investment objective of Motilal Oswal Manufacturing Fund is to achieve long term capital appreciation by predominantly investing in equity and equity-related instruments of companies engaged in the manufacturing activity. However, there can be no assurance that the investment objective of the scheme will be realized.
What is the Investment Strategy?
The scheme endeavours to take exposure to diverse sectors of manufacturing and is likely to benefit from the growth of the manufacturing theme.
The Scheme also aims to invest in such companies that are likely to benefit from government incentives & the entire manufacturing opportunity available in India.
In addition to benefits accruing from the government thrust on the manufacturing theme, such companies can leverage the relative attractiveness of India as a manufacturing destination to cater to global demands for manufactured goods.
The Scheme may also invest in sectors which offer allied services associated with the entire manufacturing lifecycle. The universe of the Scheme may also contain companies listed in India and having manufacturing facilities outside India. Manufacturing in India will also create opportunities for import substitution.
To construct the portfolio, the Scheme will follow Motilal Oswal AMC’s QGLP philosophy; following Hi-Quality Hi-Growth Investing and invest in Quality businesses with high Growth potential and sufficient Longevity of that growth potential at an acceptable Price.
The portfolio strategy shall be benchmark agnostic. The Scheme will generally practice a focused, high-conviction active portfolio strategy. It will typically select companies across market capitalization i.e., large cap, mid cap and small cap. A portion of the scheme may also be invested in IPOs and other primary market offerings that meet the Scheme’s investment criteria based on the asset allocation.
While making the investment decisions, besides other factors, the impact of the prevailing economic environment over the medium to long term prospects of the companies will also be taken into consideration.
In the pursuit of achieving its stated objective, the fund will follow an active investment strategy. Moreover, the fund house will endeavour to meet its investment objectives by maintaining a balance between safety, liquidity and return on investments.
The AMC has adequate safeguards to manage risk in the portfolio construction process. Risk control would involve managing risk to keep in line with the investment objective of the Scheme.
How Will Motilal Oswal Manufacturing Fund Benchmark Its Performance?
The performance of the Scheme will be benchmarked against Nifty India Manufacturing Total Return Index as the scheme will invest primarily following a manufacturing theme.
The Nifty India Manufacturing Index aims to track the performance of stocks that represent manufacturing sectors in India. The stocks are selected from a combined universe of Nifty 100, Nifty Midcap 150 and Nifty Small Cap 50 index.
A stock's weight in the Nifty India Manufacturing index is based on its free float market capitalization with a maximum stock cap of 5% and minimum weight to certain manufacturing sectors shall be 20% each.
Table: Top 10 Constituents of Nifty India Manufacturing Index
(Source: NSE Indexogram Factsheet as of June 28, 2024)
The constituents of the Index, suitably reflect the fund’s universe. Hence, this index is believed to be able to give a true and accurate comparative analysis.
Graph 2: Nifty India Manufacturing Index Has Fared Phenomenally Well Since the COVID-19 Low
(Source: NSE Indexogram Factsheet as of June 28, 2024)
Since its inception on August 16, 2025 (base date, April 1, 2005), the Nifty India Manufacturing Index has clocked a compounded annualised total return (which accounts for dividends) of 16.5%, while a price return of 14.9% as of June 28, 2024.
At the launch of the Motilal Oswal Manufacturing Fund, here’s what Mr Prateek Agrawal, MD and CEO of Motilal OswalAsset Management Company said,
“The evolving geopolitical scenario and domestic economic strength strategically positions India as an emerging manufacturing hub in the world. The sector is expected to gain interest and witness an upward mobility of investments from the international investors increasing exports to 4.5% by 2031, up from approximately 1.5 per cent at present. Government has also set an ambitious target of 25% of the Indian economic output for manufacturing by 2025. When looked at India's lower manufacturing wage cost compared to other SEA (South East Asian) nations, along with a labour productivity growth of 6.2% compared to China's 4.2% for FY24, it indicates that India has an advantage over other nations in terms of increased production. With the China+1 theme playing out, India is expected to benefit from the shift of production outside China.”
Mr Niket Shah, CIO of Motilal OswalAsset Management Company said,
“Manufacturing-focused funds could add diversification to an investor’s portfolio. There’s a multitude of sectors which offer exponential opportunity to the country’s exports with EMS, Chemicals and Defence leading the charge. Our government has set out a target of over INR 500bn in exports by end of this decade supported through indigenization and policy aid. Our country poses a smooth growth trajectory as we are witnessing a macro goldilocks event (Expected softening inflation, expected rate cuts, CAD Surplus and healthy forex reserves). Hence, as part of our strategy we will be investing in the uniquely positioned high conviction house identified high growth manufacturing themes which we believe might benefit from current cycle, also offering investors an opportunity to be a part of the India's manufacturing growth story”.
Who Will Manage Motilal Oswal Manufacturing Fund?
The Scheme’s domestic equity portion will be co-managed by Mr. Ajay Khandelwal, Mr. Niket Shah, Mr. Santosh Singh, and Mr Atul Mehra.
The overseas component will be managed by Mr Sunil Sawant, while Mr Rakesh Shetty will manage the debt component of the portfolio.
Ajay has 14 years of experience in fund management and research-related activity. Before joining Motilal Oswal Asset Management Company Limited he worked with Canara Robeco Asset Management Company Limited handling their small cap fund.
He has a bachelor's degree in engineering (B.E. – Electrical), PGDM – MBA, and has completed CFA level 3. At Motilal Oswal Mutual Fund he currently also co-manages other equity schemes.
Niket also has over 14 years of overall experience and currently is the Vice President – Associate Fund Manager. Before that, he was the head of midcap research at Motilal Oswal Securities Ltd., plus worked with Edelweiss Securities Ltd. as a midcap research analyst. He has an MBA (Finance) and co-manages various equity mutual fund schemes at the Motilal Oswal Mutual Fund.
Santosh has overall 16 years of experience and co-manages certain equity schemes at the fund house. He was associated with Haitong International Securities Ltd. as Head of Research and Lead Analyst from 2015 to 2018 (years), where he was responsible for Research products and overall Research strategy. He was also associated with SG Asia Holdings as an analyst from 2014 to 2015 and also with Espirito Santo Securities as a lead analyst from 2007 to 2014.
Atul also has over 16 years of overall work experience. He is Senior Vice President – Fund Manager – PMS and AIFs at Motilal Oswal Asset Management Company. He holds a master’s degree in commerce and is a CFA Charter holder. At the fund house, he manages the large cap fund and multi-cap fund.
Sunil, who is a dealer and fund manager for overseas investments, has been associated with Motilal Oswal Asset Management Company since 2018. Before that, he worked with Sharekhan, Aditya Birla and Angel Broking as Equity Dealer and Advisor. He has been associated with the capital market industry since 2009. He holds a master’s degree in commerce (M.Com).
Rakesh has more than 15 years of overall experience and expertise in trading in equity, debt segment, ETF management, corporate treasury, and banking. Before joining Motilal Oswal Asset Management Company Limited, he worked with a Company engaged in Capital Market Business, wherein he oversaw equity and debt ETFs, and customized indices and has also been part of product development. At Motilal Oswal Mutual Fund he manages various debt schemes and ETFs.
What Is the Minimum Investment in Motilal Oswal Manufacturing Fund?
During the New Fund Offer period (from July 19, 2024, to August 2, 2024), the minimum investment is Rs 500/- and in multiples of Re 1/- thereafter.
Investors also have the Systematic Investment Plan (SIP) route, wherein for daily SIPs the minimum instalment amount is Rs 100, while for weekly, fortnightly, and monthly, it is Rs 500 while for Quarterly SIPs the minimum investment amount is Rs 1,500/-, and for annual SIP instalment Rs 6,000/- 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 Motilal Oswal Manufacturing Fund, download and read the Scheme Information Document and Key Information Memorandum.
Who Should Invest in Motilal Oswal Manufacturing Fund?
Investors looking to participate in India’s manufacturing story can consider Motilal Oswal 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.
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!