Want to Invest in Space Technology? Consider These 5 Equity Mutual Funds

September 22, 2023 Mutual Fund

India has a strong emphasis on science and technology, as it has become a pivotal factor in driving a country’s economic development. The sector has seen an increase in foreign investment in recent years because more and more global corporations are establishing their Research & Development (R&D) centres within the country.

India is one of the top 5 space-faring countries in the world in the field of space exploration, with numerous opportunities. The country has regularly undertaken space missions, including lunar missions to the Moon and the famed Polar Satellite Launch Vehicle (PSLV). India is renowned for producing affordable satellites and launch vehicles.

As a result, the nation will play a leading role in launching satellites for the South Asian Association for Regional Cooperation (SAARC) nations – Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. The objective is to generate revenue by offering nation’s space facilities for use by other countries.

India has one of the most economical space programmes in the world. India has won praise from people all around the world for its accomplishments in launching lunar probes, building satellites, transferring foreign spacecraft, and even landing on Mars.

Currently, the global space economy is estimated to be around USD 360 billion USD. India is the fourth country to join the exclusive group of space powers that possess anti-satellite weapons.

Background of the Indian Space Ecosystem

India’s entrance into space research and exploration began with the formation of the Indian National Committee for Space Research (‘INCOSPAR’) under the Department of Atomic Energy in 1962.

INCOSPAR was superseded in 1969 by the Indian Space Research Organisation (‘ISRO’), with the aim of exploiting space technology to strengthen India’s position in the international competition of space exploration.

The first Indian satellite, Aryabhata, was created with the additional funding supplied by the DSSC and was launched in 1975 with Soviet Union aid as the nation’s first success in space endeavours.

Since then, India has expanded its space programme to include communication, broadcasting, meteorology, Defence, GEO satellites, astronomy, cartography, academic research, and even exploration of the Moon via three Chandrayaan missions and one Mars mission via the Mangalyaan Mars Orbiter Mission.

ISRO’s Space Milestones:

The year 2023 is important for ISRO as a number of missions are planned, and a few of them have already been launched. Here are the major space milestones that India has crossed:

• Chandrayaan – 3: The Indian Space Research Organisation (ISRO) had launched its third lunar mission on July 14, 2023. The success of this mission arrived on August 23, 2023, at 6.03 pm IST, scripted India’s name in history as the first country to successfully achieve a soft landing of a spacecraft on the Moon’s Southern pole.

The Vikram Lander in Chandrayaan-3 has now successfully deployed the Rover that will conduct on-site chemical analysis of the lunar surface while it traverses the terrain.

• Aditya L1: Aditya-L1 was launched aboard the Polar Satellite Launch Vehicle (PSLV) C57 at 11:50 IST on September 02, 2023, ten days after the successful landing of ISRO’s lunar mission, Chandrayaan-3. It is the first Indian mission dedicated to monitor the sun with seven specially designed distinct scientific payloads, five of which have been developed by the ISRO.

The successful launch of Aditya-L1 marks the culmination of over 15 years of planning.

• Mangalyaan (Mars Orbiter Mission): On November 05, 2013, ISRO launched its first spacecraft bound for Mars. India built Mangalyaan (‘Mars craft’) to study the Red Planet and test key technologies required for exploring the inner solar system.

The Mangalyaan spacecraft successfully entered Mars orbit on September 23, 2014, a milestone that positioned ISRO as only the fourth space agency in the world to accomplish this feat. Prior to India, only the United States, the Soviet Union, and the European Space Agency (ESA) had successfully explored Mars.

Apart from these widely known space missions, the Indian space sector has a strong presence in different aspects of the space industry, encompassing aerospace engineering and astronautics.

In this article, we delve into the recent space developments, industry forecasts, and how one can invest in Spacetech stocks to benefit from their growth potential. Read on to know more…

All major economies are striving to explore and exploit space. This extends beyond government-funded space programmes. Private space exploration has become one of the industries with the quickest growth.

India’s business sector, both start-ups and expanding existing companies, will be able to participate in the nation’s space mission under the auspices of a new organisation called IN-SPACe. The Prime Minister has stressed the significance of fostering private sector participation in all high technology sectors, including space, to unleash the potential of India’s youth and entrepreneurs fully.

Spacetech: The Next Big Investment Opportunity in India?

ISRO is the sixth largest space agency in the world. India is experiencing a new era of space-related science and research, with applications for space and aerospace technologies. This has developed in a setting that benefits from government backing, new knowledge frontiers, and a proliferation of start-ups that have access to a variety of funding options.

According to a report by the Indian Space Association (ISpA) and Ernst & Young, India’s space sector will have a USD 13 billion market value by 2025, with the satellite launch services market predicted to grow at the fastest rate due to increased private engagement.

The government’s encouraging decision to include private companies in the Indian space ecosystem is anticipated to increase the number of Indian space launches. According to ISRO/Department of Space guidelines, India permits Foreign Direct Investment (FDI) of up to 100% in satellites (their creation and operation) through the government clearance procedure.

Following the GST Council meeting in July 2023, start-ups in the field of space technology would benefit from a 0% GST regime. In January this year, Microsoft announced it would collaborate with ISRO. Aatma Nirbhar Bharat’s vision calls for a significant revamp of government-led space activities to make it a reality.

For international investors looking to participate in trailblazing inventions, profitable marketplaces, and game-changing breakthroughs, India’s space sector stands out as a vibrant location. The industry enjoys support from the government, strong scientific alliances, a cost-effective strategy, a growing talent pool, advantageous regional regulations, and a quickly expanding ecosystem for tech-driven start-ups.

There is a lot of potential for the Indian Space Sector to emerge as a significant participant in the global space, given India’s strength in Information Technology (IT) sectors and expertise. By bringing much-needed clarity to space reforms and boosting private industry participation to advance the nation’s space economic prospects, the Indian Space Policy 2023 would pave the path for future development.

The space/aerospace industry has drawn the attention of investors thanks to recent achievements by India, such as the economical method used to land on the moon for a mere Rs 615 crore.

Many investors are looking to make substantial purchases in stocks related to the space/aerospace industry. As India’s space sector continues to soar, investors have the opportunity to ride the wave of growth and contribute to shaping the future of space exploration and technology.

As the Spacetech industry is still in its early stages, now is the perfect time to keep an eye on these companies and their growth potential. Mutual funds is the most sensible approach for investors to purchase Spacetech stocks without the significant risk associated with direct equity investment.

Here is a list of the best 5 Spacetech Mutual Funds that could enable you to participate in India’s space economic growth narrative.

#1 – HDFC Defence Fund (Sectoral Fund)

Recently launched in June 2023, the HDFC Defence Fund aims to invest predominantly in equity and equity-related securities of Defence & allied sector companies.

The scheme currently has an AUM of Rs 1,328.07 crore. It invests across the market cap, and as of August 2023, it holds 34.36% allocation in large-caps, 16.17% allocation in mid-caps, and 38.05% in small-caps.

HDFC Defence Fund – Allocation to Spacetech Stocks

Data as of August 31, 2023
(Source: ACE MF, data collated by PersonalFN Research) 

The scheme holds an overall allocation of 26.65% in Spacetech sector stocks as of August 2023. It includes 17.75% in stocks of Hindustan Aeronautics Ltd., is an Indian public sector aerospace and defence company. The Aerospace Division of HAL is dedicated to the manufacture of hardware for India’s growing space programs.

Apart from this, the scheme has a 7.24% allocation to Astra Microwave Products Ltd., which designs, develops and manufactures sub-systems for RF and microwave systems used in defence, space, meteorology, and telecommunication.

Do note that the scheme holds a higher exposure to small-cap stocks and does not carry a long performance track record; thus, investors may consider their suitability before investing in this scheme.

#2 – 360 ONE Focused Equity Fund (Focused Fund)

360 ONE Focused Equity Fund invests in a concentrated portfolio that is predominantly constituted of equity and equity-related instruments. As of August 2023, the fund has a 60.38% allocation in large-cap stocks and 18.35% in mid-cap stocks, whereas 17.82% in small-cap stocks.

360 ONE Focused Equity Fund – Allocation to Spacetech Stocks

Data as of August 31, 2023
(Source: ACE MF, data collated by PersonalFN Research) 

The scheme holds an overall allocation of 8.10% in Spacetech stocks; it includes fair exposure to companies engaged in manufacturing products and services related to activities in the space sector.

The fund has 3.28% exposure to CYIENT Ltd., which offers integrated design, build and maintain solutions for end-to-end aerospace life cycle management needs. It also holds allocation to Data Patterns (India) Ltd. and Astra Microwave Products Ltd. from the Spacetech industry.

#3 – Edelweiss Recently Listed IPO Fund (Thematic Fund)

Edelweiss Recently Listed IPO Fund invests in equity and equity-related securities of companies which are new in the sector, early in their growth stage and are poised to benefit from the India growth story in the long term.

Launched in 2018, the scheme invests across market cap, and as of August 2023, it holds 20.91% allocation in mid-caps and 65.47% in small-caps.

Edelweiss Recently Listed IPO Fund – Allocation to Spacetech Stocks

Data as of August 31, 2023
(Source: ACE MF, data collated by PersonalFN Research) 

Do note that the scheme holds most of its assets in mid and small-cap stocks, which are highly volatile and risky. Thus, ensure your suitability for the fund before considering any investment.

Currently, the scheme has an AUM of Rs 952.98 crore, and it has an overall allocation of 7.95% to Spacetech stocks. As of August 2023, the scheme holds a fair allocation of 4.08%% in Data Patterns (India) Ltd. (Aerospace electronics solutions provider) and 3.87% CE Info Systems Ltd. (leading provider of advanced digital maps, geospatial software, and location-based IoT technologies).

#4 – Franklin India Opportunities Fund (Thematic Fund)

Franklin India Opportunities Fund aims at investing in opportunities presented by special situations such as corporate restructuring, Government policy and/or regulatory changes, companies going through temporary unique challenges and other similar instances.

The scheme invests across market caps with an allocation of 37.34% to large-caps, 24.61% to mid-caps, and 32.05% to small-caps as of August 2023.

Franklin India Opportunities Fund – Allocation to Spacetech Stocks

Data as of August 31, 2023
(Source: ACE MF, data collated by PersonalFN Research) 

Being a thematic fund, the scheme carries a concentration risk due to exposure to a single sector. As of August 2023, it has an allocation of 4.58% to Hindustan Aeronautics Ltd., a market leader in the Spacetech industry. Currently, the overall allocation to these Spacetech stocks is around 7.04%

#5 – Motilal Oswal Focused Fund (Focused Fund)

Motilal Oswal Focused Fund aims to achieve long-term capital appreciation by investing in up to 30 companies with long-term sustainable competitive advantage and growth potential. The scheme holds an AUM of Rs 1,691.84 crore and is benchmarked against NIFTY 500 TRI.

Motilal Oswal Focused Fund – Allocation to Spacetech Stocks

Data as of August 31, 2023
(Source: ACE MF, data collated by PersonalFN Research) 

The scheme holds an overall allocation of 6.45% in stocks of the Spacetech sector. The fund holds an allocation of 4.14% to L&T Technology Services Ltd., which has aerospace engineering expertise and skilled resources to drive innovation for Aerospace and defence customers across the globe.

To conclude…

The Indian space market is currently valued at USD 8 billion and is growing substantially. It is anticipated by experts that the space Industry’s contribution to India’s GDP may double from the current 0.25% to 0.5% by 2040.

India is on the cusp of a space revolution. Future prospects for space equities are promising thanks to the government’s increased emphasis on space technology, the entry of private enterprises, and the initiation of numerous significant programmes and space projects already underway.

All things considered, India is poised to make an indelible imprint in the field of space exploration and technology. Investors may position themselves to invest in these potential Spacetech stocks via mutual funds to mitigate the portfolio risk and follow a long-term approach.

However, prior to making a mutual fund investment in Spacetech stocks, one must consider the mutual fund’s suitability for the fund, conduct in-depth research on the holding firms involved in Space/Aerospace economy activities, and assess the past performance of the mutual fund schemes.

This article first appeared on PersonalFN here