India’s drive for urbanization is the catalyst behind the steady influx of new infrastructure projects, creating immense potential in the infrastructure sector. As the nation builds toward becoming a $5 trillion economy, this higher goal is advocating for the scale and scope of infrastructure development across airports, railways, roads, and green energy, greater than ever. This expected growth presents a one-of-a-kind investment opportunity, ideal for investors aiming to diversify their portfolio with high-growth potential assets.

We present infrastructure index funds, an investment option that can capitalize on this growth potential. These funds offer an accessible way for investors who want to be on this growth journey of India’s economic transformation.

Understanding India’s push towards the infrastructure sector

With the infrastructure sector labeled as the backbone of any developing economy, the Indian government’s focus on this sector is understandable. Infrastructure enhances connectivity and supports multiple industries (even smaller businesses), fueling long-term economic resilience. The government has targeted a major increase in public spending (as mentioned in the Union Budget 2024) on high-impact projects and encouraging private-sector participation. Initiatives such as the National Infrastructure Pipeline (NIP) and PM Gati Shakti show India’s commitment to developing world-class infrastructure.

[Disclaimer – The article is intended for informational purposes only and does not imply any guarantee of returns or performance. While these government initiatives may support the growth of the sector, there is no assurance that they will have a positive or lasting impact on the sector’s or the scheme’s performance.]

Why infrastructure index funds?

The sector requires substantial investment, meaning direct investments in individual companies from the infrastructure sector can be susceptible to market volatility. By investing in an index fund, investors gain exposure to the sector's growth potential without the concentrated risk of investing in individual stocks. Infrastructure index funds are passively managed and tend to have lower expense ratios, making them a cost-effective choice for investors. They track a predetermined index, canceling the need for extensive research and monitoring of individual stocks.

Infrastructure index funds are an attractive investment choice for those who want to tap into the vast potential of India’s infrastructure development without the complexities and risks of direct investments in individual infrastructure companies.

Benefits of investing in infrastructure index funds

1. Potential for long-term growth

Infrastructure projects are capital-intensive projects, generally backed by long-term contracts. Since long-term investments are often insisted on, infrastructure investing may appeal to investors with long-term goals. The extended timelines of the infrastructure projects can offer revenue generation due to the critical nature of infrastructure in an economy.

2. Diversification across the sector

These funds provide exposure within the infrastructure ecosystem, a diversified basket of companies ranging from construction, energy, transportation, etc. This broad exposure may help spread risks, potentially reducing the impact of market volatility on your portfolio. This diversified portfolio can help reduce the risk associated with holding individual stocks, giving a balanced exposure across multiple segments within the sector.

3. Alignment with government initiatives

The latest government initiatives aim to attract investments into many infrastructure projects. These funds allow investors a direct investment in these projects, benefiting themselves and incentivizing the infrastructure development. National Infrastructure Pipeline (NIP) and the PM Gati Shakti program are two examples of the Indian government’s commitment to infrastructure development.

[Disclaimer - The article is intended for informational purposes only and does not imply any guarantee of returns or performance. While these government initiatives may support the growth of the sector, there is no assurance that they will have a positive or lasting impact on the sector’s or the scheme’s performance.]

4. Inflation protection

Infrastructure index funds can protect your portfolio from inflationary pressures, potentially acting as a hedge. As a result, infrastructure index funds offer the potential to protect purchasing power during inflation periods.

Introducing the upcoming NFO, Aditya Birla Sun Life BSE India Infrastructure Index Fund

Aditya Birla Sun Life Mutual Fund is launching its latest NFO, Aditya Birla Sun Life BSE India Infrastructure Index Fund, on November 14th, 2024. This scheme aims at capitalizing on the emerging market opportunities seen in the infrastructure sector for a long-term horizon. Investors investing in this NFO can benefit from a single investment in multiple industries with high-growth potential in the long run. The NFO is a passively managed fund and tracks the BSE India Infrastructure Total Return Index as its benchmark index.

Also Read: Aditya Birla Sun Life BSE India Infrastructure Index Fund NFO

[Disclaimer - Aditya Birla Sun Life BSE India Infrastructure Index Fund (“Scheme”) is based on the BSE India Infrastructure Total Return Index. BSE® is a registered trademark of BSE Limited. The Scheme is not sponsored, endorsed marketed or promoted by, BSE or their respective affiliates. Please refer to the Scheme Information Document for disclaimers w.r.t. BSE India Infrastructure Total Return Index.]

Conclusion

The infrastructure revolution has begun in India, with many high-end projects launching. Through infrastructure index funds, investors can become a part of this infrastructure journey with this strategic approach to capture the sector’s growth potential with diversification. Infrastructure index funds can be a compelling investment choice for investors looking to balance their portfolio while aligning with India's long-term economic vision.

Aditya Birla Sun Life AMC Limited/Aditya Birla Sun Life Mutual Fund is not guaranteeing/offering/communicating any indicative yield/returns on investments. Issuer(s) / Stock(s) and Sector(s) mentioned in the document are for the purpose of disclosure of the portfolio of the Scheme(s) and should not be construed as recommendation. The fund manager(s) may or may not choose to hold the stock mentioned, from time to time.

The article is intended for informational purposes only and does not imply any guarantee of returns or performance. Investors should consult their financial advisors if in doubt whether the product is suitable for them.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.