Do your mutual fund schemes have huge exposure to PSU banks? Here is a list

State-owned banks or PSU banks are under the spotlight. Many investment experts believe that the PNB scam might claim more victims in the PSU banking sector in the coming days. Even prominent PSU banks like SBI and BoB are down because of the negative sentiment about the sector. Shares of PNB have been tumbling every day since the news about the scam became public.

Predictably, mutual fund investors are worried whether their schemes have huge exposure to the troubled PSU banks. PSU banks were already under pressure because of the cleaning of their account books and rising NPA problem.

We did some data mining to find out about mutual fund schemes with a significant exposure to the PSU banking sector. We did not consider PSU banking sector schemes, banking ETFs and banking and financial services schemes, as they obviously will have considerable exposure to PSU banks.


Here is the list of open-ended equity schemes (See Table below) which have more than 10 per cent of their corpus in shares of public sector banks. We used Ace Mutual Fund for the research.

Should investors worry?
In the two days since the scam hit the headlines, PNB shares crashed by 22 per cent, Allahabad Bank fell by 8.5 per cent and other PSU banks are all in red as well. The fall is going to hit the sectoral schemes badly.

Vidya Bala, Head of Mutual Fund Research, Fundsindia.com, says that investors who entered banking sector funds need to be aware that sector funds tend to be risky. “If they are not already well-diversified, they should consider diversifying to diversified funds.”

However, Bala asks investors in other schemes with a large exposure to PSU banks to avoid any knee-jerk reaction. “I don't think we need to worry about the knee-jerk reaction in the market to PSU stocks. Mutual funds may even use such opportunity to buy some better PSU stocks on dips.”

In short, investors should wait and watch.