Union Budget 2024: 3 sectoral mutual funds in limelight. Should you invest? (2024)

The finance minister announced budget allocations to various sectors, with significant amounts designated for agriculture, defense, and infrastructure. In the budget speech, Nirmala Sitharaman allocated Rs 1.52 lakh crore to agriculture and allied sectors, Rs 4.54 lakh crore to the defense sector and infrastructure sector was allocated Rs 26,000 crore.

After the budget allocations made to different sectors, mutual fund advisors and experts have been recommending sectoral mutual funds based on three sectors such as infrastructure, banks and financial services, and consumption. ETMutualFunds reached out to few other experts to know how these three sectors are expected to perform going forward and what strategy should be followed by an investor if they make an allocation in these sector based funds.

How are these sectors - consumption, infrastructure, and banks expected to perform while going forward?

“Although some negative for taxpayers, the government has balanced out the budget with continuity in policy and capex expenditure side by side addressing the needs for lower middle income group with focus on skilling and job creation for youth under employment linked incentives while keeping lower fiscal deficit,” said Mayur Shah, PMS Fund Manager, Anand Rathi Shares and Stock Brokers.

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Consumption sector

Manish Kothari, Co-founder & CEO, ZFunds believes that the latest budget is more balanced and marks a shift towards enhancing the purchasing power and disposable income of the middle and lower classes. The strategic move will give a boost to the consumption sector.

“This strategic move is expected to stimulate demand for discretionary goods and services, which could lead to a surge in the performance of consumption sector funds. Some parts of the consumption sector have underperformed in the broader market in the last couple of years but now look attractive,” said Kothari.

Infrastructure sector

“In the last few union budgets, the NDA Government has prioritised the infrastructure and defence sector significantly increasing investment in this area, which boosted the performance of the funds in this sector,” said Manish Kothari.

“Overall capex allocation of Rs.11.1 trillion 3.4% of GDP is positive for infrastructure -Road and Railway, defence, construction, telecom, power & manufacturing sectors. Although valuation stretched in some of the pockets, the sector remains positive for investments,” said Mayur Shah.

Banks and financial services

“For the banking sector, Budget is neutral with lower fiscal deficit becoming more supportive for interest rates. To meet the financing needs of the economy, the government will bring out a financial sector vision and strategy document to prepare the sector in terms of size, capacity and skills. This will set the agenda for the next five years,” commented Shah.

“The banking and financial Services sectors also look attractive given the tailwinds of stable interest rates, a robust economy and a strong balance sheet,” commented Kothari.

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In the last one year, banks & financial services sector based mutual funds have offered an average return of around 23.38% of which Quant BFSI Fund offered the highest return of around 62.16%.

The consumption based and infrastructure sector based mutual funds have offered an average return of around 36.03% and 65.53%, respectively. Nippon India Consumption Fund offered the highest return of around 41.91%. Bandhan Infrastructure Fund offered the highest return of around 84.03%.

Looking at the past performance of these schemes, are you looking forward to make an investment in these funds? What strategy should you follow?

“Though we like the above sectors, we do not advise a disproportionate allocation to these sectors. Investors can look at 10-15% allocation. Investors who are already invested in Infra sector, should also keep in mind the above range,” recommended Kothari.

“Investors should allocate 50% - 60% of the Equity portfolio between Infrastructure, consumer discretionary and housing sector to participate in India Growth Story,” recommended Shah.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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