Mutual fund advisors are bullish on infrastructure schemes. Should you invest?

Infrastructure mutual fund schemes have delivered the highest average return of 43.6 per cent among all sectoral schemes, including banking and financial services, energy and power, FMCG, pharma and technology, in 2017. According to mutual fund advisors, infrastructure schemes are likely to offer superior returns in the coming years, provided if the investor is prepared to hold on to investments for five to seven years.

Raghavendra Nath, Managing Director, Ladderup Wealth Management, an investment advisory firm, believes that infrastructure is going to be a prominent theme during the next five to seven years as the economy gains momentum.

“Central Government is spending almost Rs 6-8 lakh crore every year on Infrastructure development. Not only the count, the size of the projects have become larger too, which is driving the sector,” he says. Apart from government capital spending, rising flow of foreign direct investments is also pushing the infrastructure sector, Nath adds.


Rajesh Iyer, Senior Executive Director & Head of Investment Advisory & Family Office, Kotak Wealth Management, says that high networth individuals are showing their interest in theme based funds and fund inflows into such schemes are rising.

Is it a good buy for a retail investor?
If some investment is good for a big portfolio, the same will be good for a small portfolio as well. However, Rajesh Iyer cautions investors that they must assess their risk profile before getting in a specific theme-based mutual fund. Only a person who understands risks involved with a particular sector, should go ahead and invest in it, he says.

Investors also should not get swayed by the high returns that the sector has generated in the recent one or two years, and invest with a long-term commitment, say advisors. “The last two years have been quite big for infrastructure funds. It may confuse investors about the return potential. One should understand that infra projects have a long gestation, and the companies which are operating in this sector will see only a gradual improvement in their profitability.”

Take a look at the how infrastructure schemes have performed over the recent years.