CPSE ETF, the largest PSU fund based on assets managed, gave the highest return of around 9.47% in the last three months. The scheme had an AUM of Rs 46,793 crore as on July 2024.
ICICI Prudential PSU Equity Fund gave 5.44% in the said period, followed by SBI PSU Fund which gave 3.23% return in the similar time frame. Invesco India PSU Equity Fund, the oldest fund in the category, delivered 2.82% return in the last three months.
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After topping the return chart in the last one and three years, what has impacted the performance of these funds? Has the performance gone down after the budget?
“The performance of PSU funds has recently dipped due to time corrections. These funds had run up substantially in the last 2 years and are now reverting to mean. Equity mutual fund returns are inherently non-linear, sometimes surging initially and at other times later in the investment period,“ mentioned Manish Kothari, Co-founder & CEO, ZFunds.CPSE ETF, the topper in the last one and three years, gave 112.76% and 60.26% returns respectively. ICICI Prudential PSU Equity Fund which has been there in the last one year period only offered 82.19% return. Invesco India PSU Equity Fund, the oldest PSU fund, gave 82.07% and 40.59% returns in the last one and three years respectively.
After offering a remarkable performance in the above mentioned period, should an investor make allocation in these funds?
According to the expert, the investors can make allocation in these funds only if they have a longer investment horizon of around 4-5 years.
“Investors getting into these funds now should have an investment horizon of 4/5 years,” recommended Kothari.
Based on the yearly returns for the last 10 years (2014 – 2023), PSU theme based mutual funds have offered negative returns in 2015, 2018, and 2020. In the last 10 years, these funds have offered the highest return in 2023 of around 59.23%. In 2018, these funds lost around 19.90%. In 2024 so far, these schemes have offered an average return of 40.37%.
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PSU theme based schemes are benchmarked against Nifty CPSE – TRI and BSE PSU – TRI which offered 9.49% and 4.77% return in the last three months.
Are PSU funds going to offer low returns or will bounce back? What is the outlook of these funds?
The expert recommends that investors should have return expectations based on long term horizon say five and seven years and not on short term performance.
“The future returns expectations should be based on the last 5/7 years annual returns of these funds and not on the last 1/2 year returns,” said Kothari.
PSU funds are thematic funds that invest in stocks of public sector undertakings or PSUs. These companies are government-owned. So they are influenced by government policies on sectors they are operating.
You should invest in these schemes only if you have a long investment horizon or have intimate knowledge about the sector to time the entry and exit in these schemes. Remember, every sector or theme can go out of fashion depending on the economic conditions. You should not make hasty decisions in those phases.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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