Investment in these three categories of mutual funds tripled and gave up to 90 percent return

Personal Finance: Infrastructure funds have given an impressive average return of 74% last year. With this, it has joined the list of top performers on the mutual fund return charts. Infrastructure funds are only behind the PSU theme category, which has recorded better growth in recent years. According to a report by Value Research, some infrastructure funds are giving returns of up to 80-90% in a year. Investment in this category has tripled due to returns in the last two financial years.

Experts believe that the growth in the segment may continue. However, they advise investors to understand the cyclical trend and the risks involved before investing in these funds.

Rs. 1100 crore investment

According to Morningstar India, infrastructure funds saw inflows of ₹1100 crore in 2022. This number will increase to Rs 2359 crore in 2023. In comparison, inflows have tripled to ₹3376 crore in the first four months of 2024 alone compared to 2022.

Reasons for the rise in infrastructure funds

A major contributor to the rise in infrastructure funds is the government, which is spending heavily on infrastructure. For FY25, the government has allocated a record budget of over ₹11 lakh crore for infrastructure projects. Investors are trying to take advantage of this move by making infrastructure mutual funds an attractive instrument. According to government data, spending on infrastructure has doubled from Rs 5.5 lakh crore to Rs 11 lakh crore in FY22.

Infrastructure funds in India invest in sectors such as transport, energy, water and sanitation, communications and both social and commercial infrastructure. There are currently 16 sectoral and thematic infrastructure funds in existence, of which two are passively managed. The rest are actively managed and benchmarked against the Nifty Infrastructure TRI and BSE India Infrastructure TRI.

Consider the risks, too

Infrastructure funds also face a number of risks. Companies often operate on low profit margins and are heavily indebted, increasing the risk of default. These sectors often face challenges such as regulatory changes, project delays, economic stability, legal disputes, and logistics.