PSU mutual funds offer up to 100% return in one year. Have you invested in these? (2024)

PSU theme based mutual funds offered an average return of around 99.76% in the last one year, an analysis of performance by ETMutualFunds showed. Around five PSU funds have completed one year of existence in the market.

Two funds offered double-digit returns in the last one year. CPSE ETF, the largest fund in the category based on assets managed, offered the highest return of 116.41% in the last one year. SBI PSU Fund delivered 101.56% return in the same time period.

Invesco India PSU Equity Fund, the oldest fund in the category, gave 99.12% return in the last one year. Aditya Birla SL PSU Equity Fund and ICICI Prudential PSU Equity Fund gave 95.60% and 86.12% returns respectively in the similar time period.

Are you wondering how these funds have managed to offer this performance? What factors helped them? “The PSU funds had not performed well for the past few years until 2022. When the markets had a huge turnaround in 2024, most sectors did very well and therefore PSU funds had a higher return in 2024, considering the lower base in 2022,” said Rajesh Minocha, a Certified Financial Planner (CFP), Founder of Financial Radiance.

Also Read | 23 equity mutual funds offer over 60% return in one year. Have you invested in any?

In the last three and five years, these funds gave an average return of 42.19% and 27.73% returns respectively. CPSE ETF, the topper in the category, offered the highest return in the last three years. The scheme gave 51.79% return in the last three years. Invesco India PSU Equity Fund gave 39.62% return in the same time period.

In the last five years, Invesco India PSU Equity Fund offered the highest return of around 30.40%, followed by CPSE ETF which gave 27.19% return.

Are you considering these funds for investment? Should you make an allocation in these funds at this point of time? “No, the funds have already run up at higher peak levels. While the outlook is still considered positive, considering the overall positive sentiment in the country, I would not advise to take that risk. PSU equity funds are suitable for very aggressive investors with an exposure of no more than 8% to 10% of the total portfolio,” suggests Minocha.

The schemes are benchmarked against Nifty CPSE - TRI and BSE PSU - TRI. The benchmarks went up by 117.18% and 107.49% in the last one year. In the last three years, these benchmarks offered 52.45% and 44.49%, respectively. In the last five years, these benchmarks were up by 27.72% and 27.80%, respectively.

Will these funds continue to offer this performance in the coming times? What is in store for these funds in Modi 3.0? “The outlook for these funds is positive in Modi 3.0. Some sectors within PSU are still underrated as compared to others. However, just like any sector fund, these are also subject to concentrated and market risks. The better approach could be to invest through flexi cap type funds, where the fund manager can decide whether to invest in these funds. The timing will be critical, both during the entry and exit. It is very difficult for retail investors to get timings for both right, as sometimes greed can set in and investors may not exit when the sector has reached the peak. Therefore, retail investors, esp. those with a lower risk appetite could leave that judgement to the experts and not invest themselves into PSU funds but through diversified equity funds,” recommends Minocha.

Also Read | Here's what Kotak Mutual Fund bought and sold in May

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)

If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on[email protected] alongwith your age, risk profile, and twitter handle.

...moreless

...moreless