A low risk option


Mutual fund schemes focusing on the Infrastructure sector are in the limelight. They, along with their information technology counterparts, continue to outsmart pure diversified equity schemes. Three infrastructure funds find place among the top five gainers when you study the mutual fund gainers list. So, it is time to take a closer look at the Infrastructure fund schemes.

This is nothing new. Every now and then we will have a particular sector outperforming the general index. This time it is IT and Infrastructure stocks that is leading the rally in the market say a few fund managers.

However, investors should realize that investing in a particular sector requires them to take a call on that particular sector. If they are qualified to do it, they can invest in that sector. That’s for the theory. Now, let us come back to our original question. Is it advisable for the investors to start allocating money to infrastructure funds?

That is the wrong way to go about it. Fund allocation should be based on investment objective and risk appetite. One should remember that when the investor is taking exposure in a particular sector, fortunes will depend entirely on that sector.

The point is, while allocating funds keep in mind that investing in a scheme could prove riskier than a pure diversified equity scheme.

That was for fresh funding. If one is thinking about redeeming his investments in diversified schemes he must think again. According to experts, it wouldn’t be a great idea, as these schemes might have some good small and mid-cap stocks, which have been lagging behind the index stocks in the current rally.

Finally, what are the prospects of the infrastructure sector? Is it also going to be one of those sectors which will have seasonal wide fluctuations?

Infrastructure funds are basically cashing in on the India story. For the country to grow at over 8%, we need to build our infrastructure facilities, says investment advisor. Also investing in these funds is not as risky as a pure sector fund, as the scope and definition of infrastructure is very large. You will find that the portfolio is quite diversified.

We said diversified above. The diversified infrastructures sectors include power, oil, mining, telecom, road building, civil aviation and export processing zones have been opened up for the private sector. In the case of infrastructure, the post-reform years have actually witnessed a paradigm shift; monopoly of government /public sector has yielded place to private investment. The provision of such services is made for in a commercially viable manner. The investors also can take assurance from the fact all infrastructure sectors are entitled for good tax incentives.