with an average of 74.40% Return in one year, infrastructure fund Includes toppers in the returns chart. This boom can be attributed to increased government focus and spending in this sector. Many fund houses are asking investors to revisit thematic funds investing especially in infrastructure stocks. The question is whether retail investors should bet on these sector funds and if so, how much?

The government has given clear priority to infrastructure spending. National Infrastructure Pipeline (Japani) is the government’s effort to enhance India’s infrastructure through an identity Investment 111 lakh crore between the financial year 2020-25. According to a note published by Invesco India Mutual Fund, the share of capital expenditure is increasing which lays the foundation for economic growth in subsequent years. Sectors like roads, railways, water saw a significant increase in allocation for FY 2012. The government is increasing investment in the infrastructure sector and is looking at private sector participation. This, coupled with charming Valuation Infrastructure makes the fund an attractive option.

The Infrastructure Index is currently trading at a discount to the Sensex. “The valuation of the infrastructure index trade not only places its 6-year average gap with the Sensex at “high discount” but also its own 6-year average PE multiple. This, in our minds, captures the ensuing recovery in earnings growth. does not – which may provide an opportunity to investors to generate better returns, as seen in the previous cycle of 2003-08,” says Amit Nigam, Fund Manager-Equity, Invesco India Mutual Fund.

If one looks at the performance of infrastructure mutual funds, one can see that the schemes are performing really well in the recent times. Along with Topper, Quant Infrastructure Fund is giving 117 per cent returns in a year and five other schemes are giving more than 80 per cent returns in a year. However, the year-on-year performance of these funds reflects the cyclical nature of these sector funds. Most of the current toppers saw negative returns in 2015, 2016 and 2018.

Mutual fund advisors believe that investors should understand that infrastructure funds are highly strategic and if one is to make strategic bets, then it should be a great time. “Sector plans are cyclical, but the infrastructure cycle is longer than other sectors. Another issue with infra in India is that even though spending has increased, there is always the possibility of projects stalling. Many new projects is facing trouble due to non-compliance with the environmental norms. The memories of 2007-2008 are still fresh. So, I think for small investors I would say that betting on infra specific scheme is very risky However, one can look at diversified funds. Fund managers never miss an opportunity to allot upcoming and outperforming sectors in those funds,” says Srinivasan, founder, SriNivesh, a financial planning firm based in Chennai. Huh.

If you want to take risk and make a strategic allocation to infrastructure funds, you should bet to reduce risk. Amit Nigam says, “Thematic funds have the potential to generate better returns from investments, however, are usually associated with high volatility. Hence, we recommend our investors to invest through Systematic Investment Plan (SIP).’