Infrastructure Sector - Funds & Stocks

nsskumar · #1 29th March 2007, 01:48 AM

I believe this sector has good potential going forward in India.

Started this thread to discuss & identify good funds & stocks in this sector.

Let us discuss the performance in the past & how it is going to be in the future.

we can add fundemental & technical analysis to the discussion on the way....

I did not want to pick a stock or fund at this time because discussion will simply
focus on a stock or a fund otherwise. Instead, let us discuss this sector in general, before focusing on a stock/s or fund/s.

thx.

nsskumar · #2 30th March 2007, 09:26 PM

We have to note that Infrastructure sector did not do well recently. But, I think it will do better in the longrun.

Sector funds contradict the basic tenet of mutual fund investing i.e. diversification by investing in stocks from a single sector. This in turn makes them high risk - high return investment propositions. The flipside becomes particularly apparent during a downturn in equity markets. While conventional diversified equity funds have investments across sectors to offset the fall in a given sector, sector funds have no such luck.

Note the recent performance

Infrastucture Funds NAV (Rs) 1-Mth 6-Mth
JM HI FI 9.53 -15.74% 3.25%
UTI Infrastructure 25.98 -12.23% 16.03%
Sundaram Capex Opp. 16.08 -11.16% 13.69%
CanInfrastructure 13.15 -11.03% 12.49%

So, the Lesson here is only investors who have a view on the sector and can time their entry and exit from the fund should invest in sector funds.

nsskumar · #3 30th March 2007, 11:49 PM

Source: http://www.icicibank.com/pfsuser/ici...t_pruicici.htm

The Infrastructure sector has received tremendous boost from the various initiatives taken in the recent past as under:

1. Public-private Participation: The Government announced clear-cut policies for active participation by the private sector in areas like Power, Telecom, Roads and Ports. Establishment of Independent Regulators like Telecom Regulatory Authority (TRAI), Central Electricity Regulatory Commission (CERC) has helped in enhancing the private sector participation.

2. Increase in FDI Limit: The Government enhanced FDI Limit in Telecom to 49%, 100% in Roads, Ports and Power Generation to remove funding constraint and enhance technical knowledge.

3. Adequate Funding: The Government created adequate funding for roads development by charging cess on petrol and diesel and social Infrastructure by education cess on direct taxes.

4. User Charges: The Government allowed market determined user charges for various services ensuring adequate return on the investments.

INFRASTRUCTURE SECTOR SPENDING

US($ BILLION)--------2001-2004------2004-2007------2006-2008

ROADS---------------7.1-------------13.3------------12.46
TRANSPORT----------2.0--------------3.4-------------6.51
POWER-------------- 8.5-------------18.4------------32.67
OIL AND GAS---------8.1-------------14.5------------16.90
TELECOM-----------14.3-------------15.9------------25.77

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