India’s share in Global Manufacturing output has remained relatively low compared to other economies. Hence, the government is focused on this space to stay globally competitive. The manufacturing sector has the potential to become a major driving force for the growth of the Indian economy.
With the rise in demand and sharp output, the manufacturing sector ended 2021 on a solid footing. However, the rapid spread of the new Omicron variant of coronavirus in December and inflationary pressures dampened consumer sentiment.
Despite losing some momentum, the manufacturing sector seems to have a positive outlook in the long run. Increased government support and policies such as Production linked incentives (PLI), National Manufacturing Policy, make in India, Skill India, Industry 4.0, Samarth Udyog, etc., have given a push to strengthen the manufacturing sector in India. The PLI scheme could act as a tailwind for India’s manufacturing and sales of Electric Vehicles.
Investors seeking to benefit from India’s growth story may consider investing in sectors leading to support the growth of the Indian economy. One such sector is the manufacturing sector, and there are multiple sub-segments involved under this sector. The benchmark Nifty India Manufacturing Index measures the performance of these companies under the manufacturing sector.
Mirae Asset Mutual Fund has launched Mirae Asset Nifty India Manufacturing ETF. It is an open-ended scheme replicating/tracking the Nifty India Manufacturing Total Return Index. The Scheme will provide investors an opportunity to participate in emerging segments under the manufacturing sector and generate optimal returns.
Table 1: Details of Mirae Asset Nifty India Manufacturing ETF
| Type | An open-ended scheme replicating/tracking Nifty India Manufacturing Total Return Index | Category | Exchange-Traded Fund |
| Investment Objective | The Scheme's investment objective is to generate returns before expenses that are commensurate with the performance of the Nifty India Manufacturing Total Return Index, subject to tracking error. The Scheme does not guarantee or assure any returns. | ||
| Min. Investment | Rs 5,000/- and in multiples of Re 1 thereafter. | Face Value | Rs 10/- per unit |
| Entry Load | Not Applicable | Exit Load | Nil |
| Fund Manager | Ms Ekta Gala | Benchmark Index | Nifty India Manufacturing TRI (Total Return Index) |
| Issue Opens: | January 10, 2022 | Issue Closes: | January 20, 2022 |
(Source: Scheme Information Document)
The investment strategy for Mirae Asset Nifty India Manufacturing ETF will be as follows:
Mirae Asset Nifty India Manufacturing ETF will be managed passively with investments in stocks in the same proportion as in the Nifty India Manufacturing Index.
The scheme’s investment strategy will be to invest in a basket of securities forming part of the Nifty India Manufacturing Index in a similar weight proportion. It will revolve around reducing the tracking error to the least possible through regular rebalancing of the portfolio, considering the change in weights of stocks in the Index as well as the incremental collections/redemptions in the Scheme.
To meet the liquidity requirements, a part of the fund’s portfolio may be invested in debt and money market instruments. The scheme may also invest in other Mutual Fund schemes, subject to the regulations and the applicable guidelines.
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation for Mirae Asset Nifty India Manufacturing ETF
| Instruments | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Securities included in the Nifty India Manufacturing Index | 95 | 100 | High |
| Money market instruments/debt securities, Instruments, and/or units of debt/liquid schemes of domestic Mutual Funds. | 0 | 5 | Low to Medium |
(Source: Scheme Information Document)
About the Benchmark
The Nifty India Manufacturing Index aims to track the performance of stocks representing India’s manufacturing sectors. The stocks are selected from a combined universe of Nifty 100, Nifty Midcap 150, and Nifty Smallcap 50 index.
A stock’s weight in the Nifty India Manufacturing index is based on its free-float market capitalisation subject to the maximum weight of each stock at 5%. The index also has a minimum weight of 20% to certain manufacturing sectors.
Here is the list of the top 10 constituents by weightage and sector representation of the index:
(Source: Nifty India Manufacturing Index as of December 31, 2021)
Note that the index review is undertaken semi-annually based on data for six months.
Who will manage Mirae Asset Nifty India Manufacturing ETF?
Ms Ekta Gala will be the designated fund manager for this Scheme.
Ms Ekta Gala has completed Inter CA (IPCC) and Bachelor of Commerce (B. Com) and has a professional experience of more than 4 years. Her primary responsibility includes Dealer & Fund Management. She was previously associated with ICICI Prudential AMC as ETF Dealer.
At Mirae Asset Mutual Fund, Ms Gala currently manages Mirae Asset NIFTY 50 ETF, Mirae Asset NIFTY Next 50 ETF, Mirae Asset ESG Sector Leader ETF, Mirae Asset ESG Sector Leader Fund of Fund, Mirae Asset NYSE FANG+ ETF Fund of Fund, Mirae Asset Nifty Financial Services ETF, Mirae Asset HangSeng TECH ETF Fund of Fund and Mirae Asset S&P 500 Top 50 ETF Fund of Fund
Fund Outlook – Mirae Asset Nifty India Manufacturing ETF
Mirae Asset India Manufacturing ETF aims to invest in securities that represent various segments of the Manufacturing sector and comprise the Nifty India Manufacturing Index. The scheme endeavours to provide returns that closely correspond to the underlying index, subject to tracking errors.
The Scheme aims to provide potential broad exposure to the key manufacturing segments of the Indian economy. It allows investors to participate in the growth of key manufacturing segments, which are the government’s focus areas through various initiatives like the Production Linked Incentive (PLI) scheme. Investors may generate optimal returns by investing in emerging spaces like Electric Vehicles, Defense electronics, battery tech, etc.
Although the Scheme provides a relatively low-cost and rule-based investment approach to exposure in manufacturing themes, it is still prone to certain risks. The looming threat of third wave of the COVID-19 pandemic (with delta + omicron cases) being reported poses a risk to India’s manufacturing sector owing to supply-chain disruptions on account of restrictions, Human Resource shortage (low labour participation) and elevated input cost. While India has the potential to be the next manufacturing hub of the world, the right infrastructure and policy environment is necessary. The manufacturing sector may remain under pressure and witness higher volatility in the near term.
Being a sectoral ETF, the Scheme will focus on investing in companies only under the manufacturing sector, which makes it prone to concentration risk. These factors, among many others, could have a bearing on the Scheme’s performance and may affect negatively if the sector moves out of favour. Do note that the Omicron may pose a risk to the manufacturing activity. The state governments have already started imposing partial restrictions and weekend curfews, whereas the central government too may impose a fresh set of restrictions if the situation worsens.
The fortune of Mirae Asset Nifty India Manufacturing ETF will depend on the performance of the underlying index. Focusing on a thematic index, Mirae Asset Nifty India Manufacturing ETF is a very high-risk investment proposition and suitable for investors possessing decent understanding of the manufacturing segment and having a time horizon of over 5-years.
This article first appeared on PersonalFN here
