Skip to main content

Mutual Funds oriented towards PSU

With the government aiming to raise around `40,000 crore in financial year 2011-12, one can expect more initial public offers and follow-on public offers from public sector units (PSUs).

Companies where stake dilution has already been approved include Power Finance Corporation, Steel Authority of India (SAIL), Hindustan Copper and Oil and Natural Gas Corporation. Others like Indian Oil Corporation, Metals and Minerals Trading Corporation (MMTC) and National Aluminium Corperation Limited (Nalco) are also expected to be made available to investors this year.

To cash in on this opportunity, mutual funds houses launched PSU schemes last year to attract retail investors looking to invest in government firms. Fund managers feel PSU funds are a good avenue for retail investors and are a must-have in one's portfolio. Reason: PSUs are fundamentally strong companies and, with the government's backing, chances of defaults are less. Also, most of them have a monopoly in the industry they operate in. During the economic slowdown, they showed greater resilience than their private sector counterparts.

With a new set of government firms likely to go public this year, there will be a lot of portfolio churning in PSU funds to include more such stocks, fund managers say.

The PSU index has outperformed the Sensex by 8-10 per cent over the last 10 years. Since May 13, 2002, it has returned almost 445 per cent, as against 438 per cent from the Sensex. Also, given the scale, size and valuation of these companies, holding them can be a good bet from a risk-reward perspective. However, returns from these funds are not very attractive.

Presently, there are only four mutual fund schemes investing in PSUs, apart from two public sector bank funds. The former include Baroda Pioneer PSU Equity, Religare PSU Equity, SBI PSU and Sundaram PSU Opportunities.

According to mutual fund tracking agency, Value Research, while Sundaram PSU Opportunities has returned 10 per cent over the last year, Religare PSU Equity has returned 3.5 per cent. In comparison, the Sensex returned over seven per cent in the same period.

Others like Baroda Pioneer PSU Equity and SBI PSU have returned negative nine per cent over the last six months, almost in-line with the Sensex (negative eight per cent).

Radhika Gupta of Forefront Capital Advisors believes these aren't a bad investment option. There are good PSU banks like State Bank of India (SBI) and companies like ONGC one can consider investing in. At the same time, since most investors hold largecap schemes, she warns them not to go overboard with the theme. So, if you are already invested in largecap funds, you could stay away from PSU funds.

For instance, HDFC Top 200 holds PSU heavyweights SBI, Punjab National Bank, Gas Authority of India (GAIL), National Thermal Power Corporation (NTPC), ONGC and Oil India. Similarly, Fidelity Equity invests in SBI, Bank of Baroda, ONGC, Larsen and Toubro (L&T), NTPC and Bharat Heavy Electricals Ltd (BHEL). Both these funds are returning 13 and 11 per cent, respectively, higher than PSU funds.

It is a risky affair as these are thematic funds and you would end up putting all the eggs in one basket. One should not invest more than 5-10 per cent in these funds.

Financial planners suggest investing 80-85 per cent of your portfolio in good, largecap funds and experimenting with sector or thematic funds with the remaining. This would vary according to your age and risk taking ability.

Experts also feel these funds may not be meant for small investors (those investing up to 10,000 through systematic investment plans). Instead, they could help the bigger investors diversify their portfolio further.

In case you are planning to buy PSU stocks, that wouldn't be agood idea too, as far as the returns are concerned. The PSU index has given negative two per cent returns over the last year and negative 11 per cent over six months. Though there are many interesting stocks in this space, it is by virtue of their fundamentals and not because they are government firms. For instance, NTPC has been underperforming over the last three years.

Therefore, it's best to stick to a good large and large & midcap fund. That should suffice.

Ø       PSU index has outperformed Sensex by 8-10 % in the last 10 years

Ø       These could be safer investment avenues

Ø       But, these funds are thematic; invest up to 10 per cent

Ø       Invest in PSU funds only if not holding a largecap fund

Investing both in largecap and PSU funds could lead to overexposure

Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now