Manufacturing sector emerges as key structural play amid global supply chain shift

Mumbai: Aggressive equity mutual fund investors looking to diversify beyond banks and information technology can consider an exposure to the manufacturing theme given the rising potential for the sector amid growing domestic demand and a focus of global companies to form alternative supply chains. Wealth managers, however, believe investors should consider this as a satellite allocation for their portfolio and stagger their investments over the next six months.

The Nifty Manufacturing Index has a low overlap of only 19% with the Nifty 50. Investors looking to buy into segments absent in the Nifty 50, will find manufacturing a good fit. “The sector appears to be transitioning into the early-to-mid phase of a broader structural capital expenditure and earnings cycle-an environment that has historically supported sustained wealth creation,” says R Sivakumar, chief investment officer, Axis Mutual Fund. Sivakumar believes after a relatively subdued 2025, the outlook for 2026 indicates recovery underpinned by continued policy support, strengthening domestic demand and Global supply chain diversification.

The BSE India Manufacturing TRI has gained 7.3% year-on-year and 15.8% annually over a three-year period, outperforming the 4% and 9.3% return of the Nifty 50 in that order. Despite the outperformance, analysts believe this theme merits investment as there are new opportunities coming up in the manufacturing space in addition to traditional opportunities.

A rapid expansion in the global data center capacity has given rise to demand for power equipment, cooling systems, prefabricated industrial modules and speciality materials. In addition, geopolitical developments are forcing countries to move to green energy with focus on electric vehicles and renewables. Supply chain disruptions on account of tariffs in Europe are also bringing in opportunities for India.