Alisha Chinoy, one of India's pop divas sang a song, "made in India" in 1995 which became very popular in no time. And nearly two decades later, India's Prime Minister Mr. Narendra Modi is promoting the India story and urging everyone to "Make in India".

You see in September this year, Modi-led-NDA Government launched "Make in India" campaign which has attracted good deal of attention so far from all corners. Mutual fund houses too seem to be impressed and are not far behind in following the theme of "Make in India". In fact they are betting big on this theme and are in the process of rolling out ‘Make in India' funds. But the question is: Should you groove to the humming of ‘Make in India' and invest your hard earned money in such funds.

Well, before we answer that let us understand "Make in India" in a little more detail...

What is a "Make in India"?

Make in India" is a major national programme designed to:
 

• Facilitate investment in the country;
• Foster innovation;
• Enhance skill development;
• Protect intellectual property; and
• Build best-in-class manufacturing infrastructure
   

It is targeted across 25 sectors right from textiles & garments, leather tourism & hospitality to the highly capital intensive ones; intended at taking India on the path to long-term economic growth.

The new initiative is expected to provide supportive environment to manufacturers and instil positivity. India aims to raise share of manufacturing in Gross Domestic Product (GDP) from about 16% at present, to 25% of GDP by 2022. For achieving this, new processes have been envisaged; wherein there have been plans of developing and promoting manufacturing cities. A separate cell has been created to assist business houses and address their queries. The programme is expected to be tracked and monitored closely.

Some interesting findings...
You see, list of goods imported by India runs long from gold to defence equipment. This often exerts pressure on country's import bill, resulting in a huge foreign exchange outflow. This is because; comparatively India's exports are restricted to limited sectors such as pharmaceuticals, agricultural commodities, textile, leather products and jewellery along with services. And the trade gap between imports and exports (known as trade deficit) makes India's currency weak. Furthermore, higher imports take away many potential job opportunities from countrymen, which would have otherwise remained within India had Indian companies manufacture goods that are imported.

As far as ease of doing business in India is concerned, the Word Bank ranks India at 142nd position in the list of 189 countries considered for analysis. India is way behind the other BRIC nations. There is a connection between India's huge imports and its lack of competence in providing businesses supportive environment for doing business. But with Mr Narendra Modi being at the helm, the country's ranking on ease of doing business is likely to improve with efforts being taken to do away with bureaucratic impediments and introduce e-governance.

So, should you invest in "Make in India" funds?
ICICI Prudential Mutual Fund and Sundaram Mutual Fund have already launched funds that aim to invest in manufacturing companies. Birla Sun Life Mutual Fund is another fund house that is planning to launch a similar fund shortly. Depending on the market conditions there might be a few other fund houses who may follow suit.

PersonalFN believes investors would be better-off staying away from such fancy thematic mutual funds. Fund houses in India have demonstrated their opportunistic approach by launching sector and thematic funds time and again. PersonalFN is of the view that, the "make in India" theme basically represents attitudinal shift of India towards businesses engaged in manufacturing. Hiking investment limit for Foreign Direct Investments (FDI) in key sectors such as Defence and Insurance also suggests that attracting foreign investments acts as an indispensable part of the programme. Thus, it would be wrong to assume that the programme targets only Indian major companies and thus only Indian manufacturers would benefit. It remains crucial to see how Indian companies compete with global players. If the programme works in indeed as envisaged, it may boost investments in India and thus would create thousands of jobs in the country. However, it would be difficult to predict which sectors would run ahead of others.

Thus, PersonalFN believes, rather than betting on particular sectors, it would be wise if mutual funds try to identify good companies across spectrum of sectors while building a diversified portfolio. Although 25 sectors form a wide enough basket for mutual funds to pick stocks from, funds may still lack access to some major sectors of Indian economy, if they follow the theme in stricter manner.

PersonalFN is of the view that, rather than betting on thematic funds, you may consider investing in diversified funds following an opportunities mandate, which can give you exposure to the theme such as "make in India, along with the others, thereby ensuring adequate diversification. PersonalFN believes investors should consider risk involved in any investment proposition. You shouldn't forget that "theme infrastructure" looked extremely convincing in 2005, turned even more appealing in 2006 and appeared compelling in 2007 with rising markets. However, you can't imagine how devastating it turned out to be in 2008-09 when markets tanked. The theme still has not made a comeback in a meaningful way. Remember, good investing is not exciting, but essential boring. It remains to be seen whether humming a tune of "make in India" brings success to mutual fund investors.

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3q6j7jqgvz8@hotmail.com Jan 07, 2015 Cool! That's a clever way of loknoig at it!
Subbaraju2266@gmail.com Oct 19, 2018 Pls I am from India at taminadu Chennai my background knowledge reader's digest indiatoday award winner my background thinking step by step higher educational former Labour minister level
suncbattery@gmail.com Sep 04, 2018 How to gating fund for manufacturing of energy device.

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