Saturday, June 5, 2010


AMCs seem to have taken a liking for Public Sector Undertaking as a sector and on a NFO launching spree.
PSUs seem to be the flavour of the season. And with divestment inevitable, mutual funds are falling head over heels to launch NFOs to take advantage of the same.
PSUs are virtually in every sector except some select like Pharma, IT, FMCG thus one can be safe PSU funds are NOT Sector Funds in true sense. They are diversified.
And with PSUs being virtually Leaders in all the sectors they are present, you are virtually holding Gaint Cap, Large Cap and Larger Mid caps when you are investing in PSU funds.
PSUs provide both sector diversification as well as market cap diversification.
The Stable UPA Govt in centre is sure to go ahead with its huge disinvestment programme and PSU funds should be in a good position to capture any upside.
The resilience shown by these PSUs compared to their Private Sector counterparts during the recent economic recession also lends credibility to the addition of PSU fund to your portfolio.
“PSU stocks are generally available at a discount as compared with other companies. So, there is clearly an opportunity for mutual fund investments,” said Dhirendra Kumar, CEO, Value Research India Pvt. Ltd, a New-Delhi based mutual fund tracking firm.
PSUs are best proxy play for the Indian Economic Growth story. PSU funds thus make a good addition to an aggressive long term investor's portfolio.
But, do remember, nothing prevents a Diversified Equity Fund to invest in PSUs and thus PSU funds are recommended only to those who are bitten by PSU bug and prefer Companies which are Large, low debt and are virtual monopolies in their field.
The Significant risk attached to these PSU funds are that PSUs are run by Govt policies and any negative Govt decision will affect them too.

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