Mutual Funds

Above average fare from PSU funds

Yoganand D | Updated on January 24, 2018 Published on March 29, 2015

PSU-focussed funds did better than their benchmark and the broad market



The stocks of public sector companies have had a volatile run.

After being beaten down to rock-bottom valuations in mid-2013, they had a turnaround thereafter.

They were in the limelight during the first half of 2014 after investors indulged in bargain hunting and rode on hopes of a likely improvement in the economy as a new Government came to power. Nevertheless, post-election, the action in the space turned lacklustre. The BSE PSU Index recorded a three-year high at 9,091 in early June 2014. Since then the index has been on a sideways consolidation phase with downward slant. But funds focused in this space have done reasonably well in relation to their benchmarks.

Over the last one year, both BSE PSU and CNX PSE Indices have gained around 20 per cent thanks to the gains made during early 2014.

The PSU-focused funds — Baroda Pioneer PSU Equity, Religare Invesco PSU Equity, SBI PSU and Sundaram PSU Opportunities — clocked average one-year returns of 39 per cent. In the last one year, the broader indices, Sensex and Nifty, have surged around 25 per cent. Religare Invesco PSU Equity and Sundaram PSU Opportunities have been around for more than five years, outperforming their benchmark convincingly.

The toppers

Religare Invesco PSU Equity has fared better than peer funds across time frames.

The fund has shifted its top preferred sector from banks to petroleum products. Stocks in the petroleum products sector such as BPCL, HPCL and IOC have performed well over the past one year, helping the fund to sustain its positive returns. Trimming allocation in sectors such as banks and other oil players has also boosted the returns.

SBI PSU has allocation of 33 per cent to the energy sector, followed by 29 per cent in the financial services sector.

It has 22 per cent exposure to mid-cap stocks. Poor stock selection — picking ONGC, BHEL, SAIL and PNB — meant that it has only marginally exceeded its benchmark over the past one year.

Both energy and financials sectors have almost equal weightage of approximately 36 per cent each in the portfolio in Sundaram PSU Opportunities. The fund holds as many as 39 stocks, which is highest among the category. NTPC, SBI and Coal India are the top stock choices.

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