Four PSU mutual funds offered over 100% returns in one year. Will the magic repeat after election?

Around four PSU theme-based mutual funds have offered over 100% returns in the last one year, data analysis by ETMutualFunds revealed. Five PSU funds have completed their one year of existence in the market. These five funds gave an average return of 104.38% in the last one year.

CPSE ETF, the topper in the category, gave an average return of 121.18% in the last one year. SBI PSU Fund delivered 107.66% return in the period.



Invesco India PSU Equity Fund and Aditya Birla SL PSU Equity Fund offered 104.42% and 100.17% returns, respectively. ICICI Pru PSU Equity Fund gave 88.49% return.

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“PSU companies had a dream run in FY24, which was driven by sharp rerating of multiples and better earnings growth as the core sectors have done well on the back of strong economic growth. Since the PSU stocks came from a long period of underperformance prior to 2022, there was some catch up which has happened and hence the gains look spectacular. The valuations of most PSUs are now above average and even at the higher end in sectors like defence, railways, and capital goods,” commented Mahesh Patil, CIO, Aditya Birla Sun Life Mutual Fund on the performance.

In the last three years, these schemes gave an average return of 44.61%. CPSE ETF, the topper in the category, gave 54.80%.

PSU theme-based funds gave an average return of 28.04% in the last five years. Three schemes have completed five years of existence in the market. Invesco India PSU Equity Fund gave 30.30%. CPSE ETF and SBI PSU Fund offered 27.88% and 25.92% returns, respectively.

These schemes are benchmarked against Nifty CPSE — TRI and S&P BSE PSU — TRI. These benchmarks delivered 121.97% and 122.78% returns, respectively, in the last one year.

Will the PSU funds or PSU sectors continue to deliver such performance post election results?

“One can argue for some structural rerating of PSUs since the current government has been supportive to the PSUs and is urging them to improve productivity and drive growth with right capital allocation. While we do not expect further rerating from here, if the BJP again comes to power with a larger majority in these elections, the PSUs can continue to do well driven primarily by earnings growth and even some rerating in a few sectors like power and oil and gas, which are still reasonable compared to broader market,” said Patil.

We considered all regular and growth options. We calculated absolute returns for the last one year, as in equity mutual funds returns up to one are absolute.

One should always make investment decisions based on their risk appetite, investment horizon, and goal.

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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)