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The Motilal Oswal Manufacturing Fund NFO was launched earlier this month, aiming to capitalise on the China+1 trend and the government's push for domestic manufacturing.
The manufacturing theme has been on a hot streak in 2024, with five out of 13 such funds launched this year alone. HDFC's manufacturing fund was the largest of the lot, collecting a whopping Rs 9,563 crore during its NFO period.
Back to Motilal Oswal Manufacturing Fund , it will be the tenth fund to deploy an active investment strategy in this space. In other words, the fund managers will actively pick stocks from the sector, unlike passive funds that replicate an index.
Motilal Oswal Manufacturing Fund NFO: At a glance
| Fund name | Motilal Oswal Manufacturing Fund |
| NFO period | July 19, 2024 to August 2, 2024 |
| Fund Managers | Ajay Khandelwal and Niket Shah |
| Exit load | 1 per cent if redeemed within 15 days of allotment; nil thereafter. |
| Tax treatment |
If units are sold within a year, capital gains will be taxed at 20 per cent. If units are sold after one year, capital gains are taxed at 12.5 per cent. However, gains of up to Rs 1.25 lakh are tax-exempt. |
Motilal Oswal Manufacturing Fund NFO: Investment strategy
The Motilal Oswal Manufacturing Fund will build a focused portfolio of up to 35 stocks and allocate 80 per cent of its investments to manufacturing companies across various market caps. Specifically, the fund will invest in electronics manufacturing, capital goods, energy, defence, power, auto, and auto ancillary sectors.
This contrasts with diversified equity funds, which typically allocate investor money across various sectors, spanning from manufacturing to banking and consumer goods to defence.
Motilal Oswal Manufacturing Fund's Big 3 competition
The manufacturing-themed funds have seen explosive growth, surging from Rs 100 crore in 2022 to Rs 13,000 crore by mid-2024.
This category now includes 13 funds, nine active funds and four passives.
However, the asset base is heavily concentrated, with the top 3 funds controlling about 80 per cent of the assets. The big three in this space are:
How has Motilal Oswal Manufacturing Fund's benchmark performed?
Not very well in the long run, when you compare it with India's diversified market (BSE 500). In fact, BSE 500 has outperformed the manufacturing index almost three-fourths of the time, based on five-year monthly rolling returns.
However, the manufacturing index has beaten the BSE 500 in recent months, thanks to its higher allocation to PSU stocks (21 per cent) and zero exposure to the currently struggling Banking and Technology sectors.
Who will be the managers of Motilal Oswal Manufacturing Fund?
Ajay Khandelwal and Niket Shah. Khandelwal has over 14 years of experience and previously worked at Canara Robeco, handling its small-cap fund.
Shah also has over 14 years of experience and collaborates with Khandelwal on five other funds.
The duo has been off to a good start at Motilal Oswal, but their tenures with these funds have not lasted even a year. So, it is too early to draw any conclusion.
That said, Shah's longest-managed fund at Motilal Oswal AMC is the mid-cap fund, which has delivered an annualised return of 25.2 per cent from March 2018 to July 2024, well ahead of its benchmark's 19.3 per cent and category's 19 per cent.
Motilal Oswal Manufacturing Fund NFO: Should you invest?
Investing in manufacturing funds can be a high-stakes game due to their cyclical ups and downs and sector-specific risks, so their long-term returns can greatly fluctuate.
Moreover, actively-managed manufacturing stocks have also lagged behind diversified funds. ( We had published a story in May 2024 ).
Hence, for a steadier approach, consider diversified equity funds, such as flexi-cap and multi-cap funds. They provide broader market exposure and have a longer and relatively more durable track record.
Also read: Ask these three questions before investing in an NFO
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