The share of manufacturing in India’s GDP is roughly about 17%, as per the government data at the end of the fiscal year 2024-25. The target is to take this number to 25% of GDP.
With initiatives such as Aatmanirbhar Bharat, ‘Make in India’ and Production Linked Incentive (PLI) scheme and several other reforms, the country is strategically positioned to enhance its manufacturing prowess.
Today, ‘Make in India’ has seen noticeable success in the manufacturing of electronics, semiconductors, electrical products, telecom & networking, defence, auto & ancillaries, pharma & healthcare, speciality chemicals, steel, cement, food processing, etc.
And companies across sizes and scales are participating in ‘Make in India’.
Not wanting to miss the bus, in the last couple of years, several mutual fund houses launched manufacturing funds.
One such fund was the HDFC Manufacturing Fund. It launched in May 2024 as a thematic fund. It’s currently India’s largest actively managed manufacturing mutual fund with an AUM of over Rs 118 billion (bn).
Here’s all you need to know…
HDFC Manufacturing Fund
The broad investment objective of the HDFC Manufacturing Fund is to provide long-term capital appreciation by investing at least 80% of its net assets in equity and equity-related instruments of manufacturing companies.
Up to 20% may be invested in companies other than such companies. Moreover, up to 20% of the net assets may be invested in overseas securities.
For defensive considerations, at times, it may invest up to 20% debt & money market instruments, including fixed income derivatives.
The fund also holds the mandate to invest up to 20% in units of mutual funds.
The fund follows a bottom-up approach to stock-picking and chooses companies that are:
- Engaged in manufacturing
- May benefit from the government’s Make in India initiatives
- Positioned to substitute India’s imports by manufacturing locally
- Exporting goods manufactured in India and have the potential to increase employment in India
As regards the investments in debt & money market securities, they are guided by credit quality, liquidity, interest rates and their outlook. So, it invests in a range of maturity debt papers.
As per the July 2025 portfolio, the fund has 98.1% of its assets in domestic equities as per its mandate and 1.1% is held in cash & cash equivalents.
In other words, the fund has been fully invested and this has been the case since September 2024.
Most of the portfolio is currently in largecaps (55.3%). The rest are in midcaps (20.5%) and smallcaps (21.7%). Since its inception, largecaps have been in the range of 55-65%.
The fund holds a well-diversified equity portfolio of 70 to 85 stocks, with currently 86 stocks as per the July 2025 portfolio.
The top 10 stocks comprise 33.5% of the fund’s portfolio and include names such as Maruti (5.1%), Tata Motors (4.5%), Mahindra & Mahindra (3.8%), etc.
Top 10 Holdings of HDFC Manufacturing Fund
Source: ACE MF
The fund has exposure to a range of sectors. The top three sectors are auto & ancillaries, healthcare, and capital goods.
The fund manager has stayed away from churning its portfolio too much. The portfolio turnover has been in the range of around 20-30%.
How has the Fund Performed?
The fund benchmarks its performance against the Nifty India Manufacturing – Total Return Index (TRI). This index aims to track the performance of the companies selected from the combined universe of Nifty 100, Nifty Midcap 150, and Nifty Smallcap 50 indices.
HDFC Manufacturing Fund has, over the last 6 months and 1 year has clocked an absolute return of 12.2% and -0.5%, respectively, better than the category average returns and its benchmark.
Since its inception (in May 2024), the fund has delivered about 5.5% CAGR.
Point-to-point returns are calculated using the Direct Plan-Growth option, as the fund, as of writing this piece, did not have a longer performance track record. Returns over 1 year are compounded annualised.
Standard Deviation indicates total risk, while the Sharpe Ratio and Sortino Ratio measure the Risk-Adjusted Return. They are calculated over 3 years, assuming a risk-free rate of 6% p.a.
*All actively managed manufacturing mutual fund schemes are considered to compute the category average returns.
Please note that this table represents past performance. Past performance is not an indicator of future returns.
The securities quoted are for illustration only and are not recommendatory.
Speak to your investment advisor for further assistance before investing.
Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully.
Source: ACE MF
This performance of HDFC Manufacturing Fund is a bit pale compared to older actively managed manufacturing funds. ICICI Pru Manufacturing Fund – the oldest fund in the category launched in October 2018 – has delivered a 21.1% CAGR since inception.
Similarly, Kotak Manufacture in India Fund (launched in February 2022), Quant Manufacturing Fund (launched in August 2023), and Axis Manufacturing Fund (launched in December 2023) have delivered 21%, 20%, and 22.4% CAGR, respectively, since inception.
Conclusion
The fund has not completed 3 years, which is important in assessing equity-oriented mutual funds.
Don’t base your decision on the fact that HDFC Manufacturing Fund is the largest fund in its category. Big is not always beautiful. [Read: Should You Consider Equity Funds With Large AUM?]
A scheme with large AUM does not guarantee you investment success, nor is it that your investment is safe in that fund.
A high AUM can make it challenging for the fund manager to manage the portfolio, as entering and exiting the less liquid, small-sized companies will become difficult.
Hence, when you are considering schemes with a large AUM, to make a thoughtful choice, you need to look at the portion of the fund’s portfolio actually performing.
Invest wisely considering your personal risk profile, broad investment objective, your financial goals, and time in hand to achieve them.
Happy investing.
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