Infrastructure Mutual Funds

If you are an investor looking for long-term growth trends, infrastructure funds provide a focused investment opportunity. Infrastructure funds mainly make investments in companies involved in building, operating and maintaining infrastructure assets.

Infrastructural funds invest majorly in the shares of the companies engaged in infrastructural development and maintenance. Such funds aim to generate returns in the form of capital appreciation from sectors whose activities contribute to economic growth. With growing government and private investments in infrastructures, infrastructural funds have attracted considerable interest from long-term investors.

What are Infrastructure Funds?

Infrastructural funds are sectoral or thematic mutual funds that primarily focus on investments in the companies related to infrastructural development. These may include companies operating in sectors such as:

• Power & energy
• Construction & engineering
• Transportation & logistics
• Telecommunications
• Utilities
• Port/airport-related
• Urban Infrastructure

Infrastructure funds are best suited for investors having a higher risk appetite and long-term investment horizon.

How to Invest in Infrastructure Funds?

You can invest in infrastructure funds by following simple process:

Step 1: Choose investment mode. You can invest through:

• AMC websites
• Online investment platforms provided by stockbrokers
• Mutual fund distributors

Step 2: Choose suitable infrastructure fund

Step 3: Choose between Systematic Investment Plan (SIP) and Lump sum based on your goal and make investment.

Step 4: Make payment through UPI, netbanking or other available methods.

Features of Infrastructure Funds

• Sector Focused Investment: The fund manager primarily makes investment in companies involved in infrastructure business directly or indirectly, allowing investors to participate in the growth of a high potential sector.
• Potential for Long-Term Growth: Infrastructure projects generally require several years to deliver benefits. This is the reason why such investments are usually considered as suitable for long-term wealth generation.
• Diversification Across Multiple Sectors: Despite being sector-oriented, infrastructure investment funds offer diversification across multiple industries including energy, transport, construction, and utilities.
• High Risk High Reward Potential: Infrastructure funds are likely to exhibit higher volatility compared to diversified stock funds as it is concentrated around a single theme.

Why Invest in Infrastructure Funds?

• Economic Growth Benefits: Infrastructure is viewed as one of the most important ways of achieving economic development. Investments in roads, railways, renewable energy, and city infrastructure would lead to benefits for investors working in these spheres.
• Government Involvement: Infrastructure remains a major focus area in India's development agenda, with substantial public spending and policy initiatives supporting sector growth.
• Portfolio Diversification: Infrastructure mutual funds allow investors to diversify their investments by adding theme-related exposure to their portfolios.
• Prospects for Capital Gains: Infrastructures businesses can benefit greatly from the growing economy, earning more money and increasing shareholder value.
• Growing Needs for Infrastructures: Urbanisation, industrialisation, and technological advances have contributed to the increased need for high-quality infrastructure in various cities and industries.

Taxation Rules for Infrastructure Funds

The infrastructure mutual funds are equity oriented as they invest mainly in shares of listed companies and taxed similar to equity mutual funds:

• Short-Term Capital Gains (STCG): If the mutual fund units are sold within 12 months from the date of purchase, the profits will be taxed at 20%, with applicable surcharge and cess.
• Long-Term Capital Gains (LTCG): Profits made from selling units after 12 months on gains beyond ₹1.25 lakh in a fiscal year will be taxed at 12.5%, whereas LTCG up to ₹1.25 lakh is tax-exempt.