Looking beyond the Obvious : Infra Story



Earlier this week I was in conversation with a client when he asked a question that drove me to explore the choice of funds a little bit more. He said “Can you recommend a fund category which is currently not in your list of recommendations, which is not done well in the past say 5 years, but continued to hold promise over the next 10 years “. I love challenges, after deep introspection and analysis these are my findings. 1.Over the past 7 to 10 years INFRA funds have not done great, there are variety of reasons including the Govt’s own priority of setting the fiscal house in order like GST, Demon etc.. so infra was not the chosen priority. However that does not mean INFRA does not have any hope at all. While the past may not have been great for infra funds,the future does looks promising. 2. If one were to equate the current Covid 19 challenges in line with the great depression of 1929, then most governments would have to put money into the economy through INFRA projects to spur up some amount of economic activity to prime the economy for growth. India is no different, if the govt is keen on reaching its milestone of USD 5 trillion economy by 2025, then INFRA will be a major play therein. So I dare say it is time for Investors who have patience to look at Infra sector for a long term ( 10 year ) returns.While there are lots of INFRA Funds in India, care needs to be take to invest in pure play INFRA funds rather than also ran which invest in a large way in Banking sector and other non core Infra segments,could lead you to dilute the infra theme. Please find the indicative list of Infrastructure Funds in India and their returns as on 30th June.


Infra Fund spreadsheet.




Note : With the collapse of ILFS, a large Infra lending institutions and many of the power projects in disarray the Infra segment is not without problems. But our take is that eventually Govt must work towards solving these problems if it needs to move the Infra agenda forward and we believe as the Covid issue eases, Govt will be keen to fix the INFRA Agenda of the Country. INFRA Funds could be the hidden gems that could be quite a jewel In your Investment Necklace( in 10 years).


PS : Since INFRA is a thematic Fund, we would recommend investors to not expose more than 10-20% of their holdings therein. If you are new to Mutual Funds ( less than 10 years investing experience) we recommend you should stay invested in a diversified Equity funds for better investment experience.



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