Infrastructure funds set to shine with higher budgetary allocation

In Budget 2018 infrastructure sector received a budgetary allocation of Rs 5.97 lakh crore for FY18-19. This represents an increase of 21 per cent as against revised estimates of last year. The government of India sees infrastructure investment need of Rs. 50 lakh crore to increase growth rate of GDP.

Government aims to increase the road network, airports, railways, ports and inland waterways to improve connectivity and thereby ease of doing business in India. Government’s increased focus and allocation towards the infrastructure sector will benefit the investors who have invested in the infrastructure sector.

With the increased allocation, infrastructure companies which are involved in the road construction are expected to benefit as 9,000 km of national highways will be completed in FY18-19. Also, the government has made an allocation of 5.35 lakh crore for building around 35,000 km roads.

Moreover, the government’s aim to increase number of airports by 5 times is also expected to benefit the infrastructure companies. Companies whose order book is generated by the infrastructure industries like cement companies are also expected to benefit.

The mutual fund industry offers sectoral/thematic funds which invest major corpus in the infrastructure funds. According to the December 2017 data, there are 21 equity infrastructure funds under which total asset of Rs. 17,928 crore is invested. Moreover, there are many other schemes which have invested a considerable portion of their assets in the equities of infrastructure companies. All these funds are expected to reap higher returns in the coming years.

The thematic funds following infrastructure theme has also invested in a diversified manner to minimise sector specific risks. Currently, among the 21 schemes the average investment in the engineering construction companies is around 16 per cent of the total assets. With the presence of stocks like L&T, GMR Infra, IRB Infra, Ashoka Buildcon from the infrastructure industry coupled with other industries like cement and construction as well as power generation industries we see an immense potential in these schemes in the upcoming years. With the positive takeaways from the budget these schemes are all set to build the great returns for its investors.