Top PSU Mutual Funds
PSU mutual funds are investment schemes that focus on the equity shares of Public Sector Undertakings (PSUs).
PSU Mutual Funds
Friday, 14 March, 2025
| Fund Name | AUM (Rs. in cr.) | Expense Ratio (%) | Exit Load (%) |
|---|---|---|---|
| SBI PSU Fund | 4,686 | 0.74 | 0.50 |
| Invesco India PSU Equity Fund | 1,344 | 0.85 | 1.00 |
| ICICI Pru PSU Equity Fund | 2,356 | 0.72 | 1.00 |
| Aditya Birla SL PSU Equity Fund | 5,531 | 0.54 | 1.00 |
Disclaimer
Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data on the PSU Mutual Funds list is from 13th December, 2024. However, for real-time updates visit the Tickertape Mutual Funds Screener today!
PSU Mutual Funds
Public Sector Undertaking (PSU) mutual funds are an investment option for those looking to diversify their portfolios with government-backed companies. With the Indian economy growing and PSU companies playing a crucial role in sectors like banking, energy, and infrastructure, these funds offer a unique blend of stability and growth potential. This guide explores the PSU funds meaning, their features, benefits, risks, and factors to consider when investing.
What are PSU Mutual Funds?
PSU mutual funds, or PSU sector mutual funds, are schemes that primarily invest in shares of public sector enterprises. These enterprises are either fully or partially owned by the Government of India. PSU mutual funds can be equity-focused (PSU equity funds), debt-focused (PSU bond funds), or even thematic, targeting specific sectors like banking or infrastructure.
For example, a PSU index fund might track the performance of a specific PSU-heavy index, such as the Nifty PSU Bank Index. By investing in PSU MFs, you gain exposure to some of the largest and most stable PSU companies in India.
Features of PSU Mutual Funds in India
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- Government-Backed Investments: These funds predominantly invest in companies with significant government ownership, ensuring a level of stability.
- Sectoral Focus: PSU mutual funds, including PSU bank mutual funds, often focus on specific sectors like banking, energy, or defense.
- Dividend Potential: Many PSUs are known for regular dividend payouts, which can benefit investors in the form of consistent returns.
- Lower Volatility: Due to their government backing, these funds tend to be less volatile compared to purely private sector-focused funds.
- Variety of Investment Options: From PSU equity funds to banking and PSU funds, investors have multiple choices based on risk appetite and investment goals.
Who Should Invest in PSU Mutual Funds in India?
- Risk-Averse Investors: PSU mutual funds are ideal for investors seeking relatively stable returns with lower risk.
- Long-Term Investors: Those with a long-term investment horizon can benefit from the gradual growth of PSU stocks.
- Income Seekers: Investors looking for regular dividends may find PSU mutual funds attractive.
- Sector Enthusiasts: Individuals with a bullish outlook on government-dominated sectors like banking or energy may find these funds particularly appealing.
How to Invest in PSU Mutual Funds?
Investing in PSU mutual funds is straightforward:
- Open a Demat Account: Investors need to have a demat account in order to invest in PSU mutual funds. You can open a demat account with smallcase.
- Identify a Fund: Research the best performing PSU mutual funds based on past performance, expense ratio, and fund manager expertise. Investors can utilise the Tickertape Mutual Funds Screener to sort through different PSU mutual funds using the 200+ filters available.
- Choose an Investment Mode: You can opt for a lump sum or a systematic investment plan (SIP) based on your financial goals.
- Complete KYC: Submit your KYC details, including your PAN number and bank details, to finalise your investment.
Note: It is important to conduct thorough research and consult a financial advisor before investing in anything.
Investing in PSU mutual funds via smallcase
You can also invest in PSU mutual funds via smallcase. Simply go to smallcase.com or the smallcase app, and login via your phone number. Then, go to ‘Discover‘ and enter the name of the specific PSU mutual fund in the search bar and hit enter. You’ll find the performance of the mutual fund and the minimum investment amount. Decide the particular amount you want to invest based on your financial goals and click on ‘Invest Now’ to begin your investment.
How to Select the Best PSU Mutual Funds for Investing?
Key aspects shape the evaluation of PSU mutual funds:
- Historical Performance: Funds’ past performances reveal their competitiveness and consistency over time.
- Expense Ratios: Lower expense ratios typically correlate with higher net returns.
- Portfolio Composition: The sectors and companies included indicate potential risk and reward.
- Fund Manager Expertise: Experienced fund managers demonstrate better market navigation and informed decisions.
- Risk-Return Profile: Examining the balance between risk and return ensures alignment with personal financial goals.
Benefits of Investing in PSU Mutual Funds
- Exposure to Key Sectors: PSU mutual funds provide access to critical sectors of the Indian economy, such as banking, energy, and infrastructure. These sectors often exhibit resilience and steady performance during economic fluctuations.
- Opportunities During Economic Reforms: PSU-heavy sectors often receive focused government support during economic reforms, creating growth opportunities for the underlying companies and boosting returns.
- Liquidity and Transparency: PSU mutual funds typically invest in large, publicly traded companies, ensuring high liquidity and transparent pricing for investors.
- Long-Term Capital Appreciation: Equity-oriented PSU mutual funds aim to capitalise on the gradual growth of public sector enterprises, offering long-term capital appreciation for patient investors.
Risks of Investing in PSU Mutual Funds
- Sectoral Risk: Over-concentration in government-dominated sectors can lead to volatility.
- Regulatory Changes: Government policies can significantly impact PSU performance.
- Market Risk: Like all equity funds, PSU equity funds are subject to market fluctuations.
- Limited Diversification: Funds focusing on specific PSU sectors may lack diversification.
Taxation on PSU Mutual Funds in India
Understanding the latest tax regulations on PSU equity mutual funds is essential for making informed investment decisions. The Union Budget 2024 has introduced significant changes to the taxation of equity mutual funds, simplifying the tax structure while altering rates and benefits. Here is a detailed breakdown of the new tax rules:
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 12 months | 15% | 20% |
| Long-Term Capital Gains (LTCG) | More than 12 months | 10% | 12.50% |
- No Indexation Benefit: This change affects the overall tax liability, potentially increasing it for long-term investors.
Factors to Consider When Investing in PSU Mutual Funds
- Investment Horizon: Funds align well with long-term financial goals.
- Sectoral Trends: Understanding growth prospects within PSU-heavy sectors aids decision-making.
- Risk Tolerance: Individual capacity for market risk influences fund choice.
- Government Policies: Monitoring policy changes impacting PSUs remains critical.
- Fund Objectives: Matching fund objectives with personal financial strategies ensures cohesive planning.
To Wrap It Up…
PSU mutual funds provide avenues to engage with India’s economic growth through government-backed enterprises. Exposure to critical sectors like banking and infrastructure delivers opportunities for stability and growth. Investors, through informed research and alignment with financial goals, can determine whether PSU funds suit their broader portfolio strategies. Understanding features and market nuances remains pivotal for educated decisions in this domain.
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Frequently Asked Questions About PSU Mutual Funds
How long should investments in PSU mutual funds last?
A medium to long-term horizons, spanning 5-10 years, can align well with PSU fund characteristics, balancing stability and growth as historically PSU mutual funds have performed well over the long term. However, investors should evaluate their investment objectives and risk tolerance before deciding how long to stay invested in any fund.
Are PSU mutual funds secure investments?
Government backing offers relative safety, although market and sectoral risks persist.
What defines PSU equity funds?
PSU equity funds channel investments predominantly into public sector enterprise equities, focusing on long-term capital growth.
Is SIP an option for PSU mutual funds?
Yes, SIPs facilitate disciplined and gradual investments in PSU mutual funds, helping mitigate market timing risks and build wealth over time.
Why invest in PSU mutual funds in India?
PSU mutual funds provide exposure to government-backed enterprises that operate in critical sectors of the economy. They offer a blend of stability, dividend potential, and long-term growth, aligning with financial goals.
