Insights into ICICI Prudential Manufacturing Fund
The ICICI Prudential Manufacturing Fund is an open-ended equity scheme launched by ICICI Prudential Mutual Fund, focusing on investments in companies within the manufacturing sector.
Here is a comprehensive look at its key features and performance and why it is a promising investment choice for those eyeing India’s manufacturing growth.
In this article, we will look at the fundamentals that have made this scheme strong. Let us start analysing this scheme step-wise.
Key Features of ICICI Prudential Manufacturing Fund
The following are main features, which we will shed some light on, are as follows:
Investment Objective
The primary goal is to generate long-term capital appreciation by investing mainly in equity and equity-related securities of manufacturing companies.
Focus on the Manufacturing Sector
The fund invests heavily in the manufacturing sector, spanning various sub-sectors like pharmaceuticals, engineering, consumer goods, and automobiles, capturing the diverse opportunities within the industry.
Performance Overview
The fund has shown impressive returns over different periods. For example, its 1-year return is 64.01%, while the 3-year and 5-year returns are 31.39% and 23.61%, respectively, surpassing category averages.
Fund Size and Expense Ratio
As of June 30, 2024, the fund’s assets amount to Rs.5959.57 Crore. The expense ratio is 1.92%, slightly above the category average of 1.58%, justified by its strong performance.
Top Holdings and Sector Allocation
The fund’s portfolio is diversified across manufacturing sub-sectors. The top 10 equity holdings make up about 42.62% of assets, while the top three sectors account for around 47.31% of assets.
What are the Tax Considerations on ICICI Prudential Manufacturing Fund?
The tax implications for the ICICI Prudential Manufacturing Mutual Fund can be explained in the following key points:
Short-Term Capital Gains Tax
- If the units of the fund are redeemed within one year of investment, the gains are subject to a short-term capital gains tax rate of 15%.
- This higher tax rate applies to the total gains earned on the investment during the holding period of less than one year.
Long-Term Capital Gains Tax
- After holding the fund’s units for more than one year, the gains are considered long-term capital gains.
- Long-term capital gains up to ₹1 lakh in a financial year are exempt from tax, as per the current tax laws.
Taxation on Gains Exceeding ₹1 Lakh
- Any long-term capital gains exceeding ₹1 lakh in a financial year are subject to a tax rate of 10%.
- This 10% tax rate applies to the gains above the ₹1 lakh threshold, while the gains up to ₹1 lakh remain tax-exempt.
Indexation Benefits
- For calculating long-term capital gains, the cost of acquisition can be indexed to account for inflation.
- This indexation benefit helps reduce the taxable portion of the long-term capital gains, thereby lowering the overall tax liability.
Consistent with Market Norms
- The tax structure outlined for the ICICI Prudential Manufacturing Fund is consistent with the general tax regime applicable to equity mutual funds in India.
- This alignment with the broader market practices ensures that the fund’s investors are subject to the same tax treatments as other equity fund investments.
Tax Planning Considerations
- Investors can strategize their investment and redemption decisions based on the applicable tax rates and thresholds.
- For instance, they may choose to redeem their investments after the one-year holding period to benefit from the lower long-term capital gains tax rate.
Tax Efficiency as an Investment Goal
- Tax considerations should not be the primary driver of investment decisions.
- The fund’s tax-efficient structure can contribute to the overall investment objective of generating consistent, risk-adjusted returns for its investors.
By understanding the tax implications associated with the ICICI Prudential Manufacturing Fund, investors can make informed decisions and optimize their investment strategies to maximize their post-tax returns.
Why Consider ICICI Prudential Manufacturing Fund?
Benefit from Manufacturing Growth
The Indian government’s initiatives like “Make in India” and policy reforms aim to boost the manufacturing sector, creating a favourable environment for growth.
Diversified Investment
By investing across various manufacturing sub-sectors, the fund reduces sector-specific risks and taps into multiple growth drivers.
Long-Term Capital Growth
Focusing on long-term investments, the fund identifies high-potential manufacturing companies, suitable for investors with a horizon of 5 years or more.
Experienced Management
Managed by seasoned professionals with expertise in thematic and sector-specific funds, ICICI Prudential Manufacturing Fund is well-equipped to navigate the sector’s complexities.
Detailed Review of ICICI Prudential Manufacturing Fund
Investment Strategy
The fund employs a thorough strategy, focusing on high-quality manufacturing companies with robust growth potential. It uses comprehensive analysis to ensure solid business fundamentals and market positioning.
Performance Metrics
Consistently outperforming benchmarks and peers, the fund’s performance metrics highlight its effective strategy and adaptability to market conditions.
Sector Allocation
It maintains a diversified portfolio across manufacturing sub-sectors like pharmaceuticals, engineering, consumer goods, and automobiles, capturing various growth opportunities.
Risk Management
A strong risk management framework, including clear exit strategies, helps the fund adapt to macroeconomic indicators and sector-specific developments, ensuring well-timed portfolio adjustments.
Government Initiatives
Initiatives like “Make in India” aim to transform India into a global manufacturing hub, offering investors a chance to benefit from sector growth.
Investor Suitability
Ideal for those with higher risk tolerance and a long-term investment horizon, typically 5 years or more, seeking diversification within their equity portfolios.
Conclusion
The ICICI Prudential Manufacturing MF offers a compelling opportunity to invest in India’s growing manufacturing sector. Investors can start an early SIP to make a successful track record in this scheme.
With its strategic investment approach, diversified portfolio, and expert management, the fund is positioned to deliver long-term capital appreciation. Potential investors should assess their investment goals and risk tolerance before investing in this fund.
By focusing on high-growth manufacturing companies and leveraging experienced fund management, the ICICI Prudential Manufacturing Stock aims to provide superior risk-adjusted returns, making it a strong option for enhancing equity exposure and achieving significant long-term growth.
