Data from Morningstar India highlights a significant surge in inflows into these funds during the first four months of 2024, surpassing the total inflows recorded for the entire years of 2022 and 2023 combined.
In 2022, infrastructure funds saw inflows of ₹1,160 crore, which increased to ₹2,359 crore in 2023. However, the first four months of 2024 alone have already witnessed inflows of ₹3,376 crore, effectively tripling the inflows since 2022.
The remarkable performance and subsequent inflows can be attributed to the positive outlook of the infrastructure sector and the substantial returns offered by these funds. Some notable infrastructure funds, such as Bandhan Infrastructure Fund, DSP T.I.G.E.R Fund, and Quant Infrastructure Fund, have reported returns between 80 and 90% over the past year, according to Value Research data.
A significant driver of these returns is the Indian government’s increased focus on infrastructure spending. The government has allocated a record-high budget of over Rs 11 lakh crore for infrastructure in FY25, further boosting investor confidence in this sector.
While the potential for high returns is attracting many investors, experts caution that infrastructure mutual funds come with inherent risks. These risks include regulatory changes, project delays, and the cyclical nature of the sector.
Consequently, experts recommend that retail investors should limit their exposure to these funds to no more than 5% of their investment portfolio and approach them with caution.