PSU banking funds are worst performing funds in banking sector funds

MUMBAI: Equity mutual fund schemes dedicated to investing in public sector bank stocks have been at the bottom of the performance charts among banking sector funds. According to Value Research, a mutual fund tracking entity, banking sector funds has delivered a loss of 6.62%, and stood just above infrastructure funds that lost 11.33% as a category in the last one year ended August 3, 2012.

Kotak PSU Bank ETF has lost 19.66% and Goldman Sachs PSU Bank BeES lost 18.77% over last one year. Under-performance of these funds to banking sector funds as a category is also seen over last one, three and six months time periods too.

"When it comes to PSU banking stocks asset quality concerns are ruling the investors' mind. The possibility of a populist decision to waive farm loans next year ahead of elections can further worsen the balance sheets of these banks, which has resulted into lower investors' interest in these stocks and lower valuations," says Gajendra Kothari, managing director, Etica Wealth Management. Poor performance by stocks of PSU Banks, have also pulled down the performance of schemes dedicated to shares of PSU banks.

This has also affected investor interest in these funds. According to AMFI data, Kotak PSU Bank ETF has average assets under management (AAUM) of Rs 1205 lakh for April to June 2012 quarter.

Last year, the same quarter, April to June 2011, AAUM stood at Rs 2353 lakh. Goldman Sachs PSU Bank ETF AAUM stood at Rs 861 lakh for April to June 2012 quarter compared to Rs 985 lakh in April to June 2011 quarter.