Is it worthwhile to invest in infrastructure funds?

Although markets are in a slump, few areas have performed better than the Nifty 50. One of them is the infrastructure sector. Continue reading to learn more.

As the stock market (Nifty 50) declined close to four per cent in November 2021, certain sectors of the market have beaten the Nifty 50, one of which is the infrastructure sector. Even though it yielded negative returns, the Nifty Infrastructure index outpaced the Nifty 50 by about two per cent.  

From January 2008 to March 2009, the Nifty Infrastructure index plummeted like a falling knife. Since then, it has never reached its peak, instead of settling in a range of 1,830 to 3,898 for nearly 12 years. It was in February 2021 that the Nifty Infrastructure index broke out of its consolidation and began to show indications of revival. The Nifty Infrastructure index is about 1,300 points, or 25 per cent, below its all-time high set in January 2008.  

To determine whether you should consider investing in it, we must first determine its present valuation. 

The graph above clearly shows that the values appear to be pretty appealing. It is now trading between minus one and minus two standard deviations from the mean. 

Its current price to earnings (P/E) and price to book (P/B) ratios are 17.78 and 2.94, respectively, which are lower than its 10-year median P/E and P/B ratios of 21.75 and 2.1, respectively. As we anticipate the economy's recovery, the infrastructure sector appears to be well-positioned. 

The top five infrastructure funds are shown below.