When investing in infrastructure shares While this can be very rewarding, not everyone can afford the risks that come with direct stock investing. Individual stocks can be very volatile, and small investors often make mistakes when they see their portfolios in the red. If you want to benefit from the big capital expenditure done by the government, but are not sure about buying the shares, go for infrastructure Fund rather than. These funds invest in infrastructure stocks, so investors will get the benefit of the government’s capital expenditure programme. Additionally, the investor benefits from better stock selection by the fund manager. Such funds provide a good option to investors as compared to direct investment in infrastructure stocks as fund managers can do a better job in stock selection among infrastructure companies.

The risk is also diversified by spreading the portfolio across a basket of 30-40 stocks. This Diversity Minimizes or eliminates company-specific or latent risks. Infrastructure funds also invest in companies that work on long-term projects. These stocks may not move very fast in the short run but can give very good returns in the long run. Keep in mind that infrastructure funds invest not only in construction companies but also in established companies as well as financial stocks. We looked at the portfolio of five largest infrastructure schemes. His top five holdings (in terms of market value) in August 2022 were L&T, NTPC, Bharti Airtel, Reliance Industries And ICICI Bank, Of these, only one (L&T) is in the roadways and construction section. The other four are bluechips, but the capex pie doesn’t have a finger. So don’t expect infrastructure funds to deliver returns similar to those predicted by analysts in the cover story.

However, the infrastructure sector has performed quite well in the last 6-12 months. Infrastructure sector funds have the highest category average returns in the last six months and one year. equity Diversified Funds (Large, Mid, Multi and Small Cap). There were 19 infrastructure funds with total assets under management (AUM) of over Rs 14,500 crore as of August 2022, which has grown by 16.5 per cent in the last one year and 25 per cent in the last one year. All these funds have given positive returns in the last six months, one year and three years. Also, most of these funds have outperformed their respective benchmark indices over the specified time period.

In the short term, such funds may exhibit higher than average volatility. According to data compiled from the ACE MF database, the average standard deviation of these 19 funds stood at 5.85% in the past one year as compared to equity diversified funds with an average standard deviation of 5.3%. Also, infrastructure funds averaged 1.01 beta as compared to equity diversified funds’ 0.92. A beta greater than 1 indicates higher risk because the fund’s activity is more sensitive relative to the movement of the specified benchmark (on average).

High volatility in the short to medium term is due to the risks and challenges that infrastructure companies face. These include policy or regulatory risks, project planning challenges due to change Rate of interest and exchange rates, and performance risk, unexpected cost escalation and cost escalation due to labor shortages.

Largest Five Funds (
see table) accounts for more than 55% of the total AUM of the Infrastructure Fund. The top five equity sectors in which these largest funds have invested (in terms of market value) in August this year are infrastructure, capital goods, banks, power and oil and gas.