PSU Mutual Funds: Time to Be Cautious or a Chance for Recovery?

Recently, six mutual funds focused on Public Sector Undertakings (PSUs) have not been doing well. In fact, they lost up to 12% in the last three months! The Quant PSU Fund, which is new and started in February 2024, lost the most—around 11.58%. Other funds like the CPSE ETF lost about 10.14%, while Aditya Birla SL PSU Equity Fund and ICICI Pru PSU Equity Fund had losses of 8.55% and 6.80%, respectively.

Many people are asking: Why are these funds struggling? An expert named Rajesh Minocha explained that the reasons include market corrections, global uncertainty, and people taking profits after stocks went up. He suggests that instead of jumping onto the latest trendy funds, investors should look at flexible funds like flexi-cap and multi-cap options.

Even though PSU funds have not been performing well lately, they can still be important for long-term investments, especially in sectors like infrastructure, energy, and defense, which are supported by the government. Minocha advises investors to focus on quality PSUs that have strong fundamentals and growth potential.

Currently, PSU funds are seeing average returns of around -7.87% over the last month. Invesco India PSU Equity Fund saw the biggest drop, losing about 8.72%.

For those invested in these funds, Minocha recommends being cautious. He doesn’t think investors should panic, but it’s wise to avoid putting too much money into one area. Keeping a balanced investment portfolio and watching for budget announcements can help in finding new opportunities or risks.

Minocha also emphasizes that investors should not focus on short-term gains but instead think about long-term investments. Staying invested for a longer time is key to making money.

In 2024, PSU funds had a great year, thanks to strong financials and a focus on infrastructure by the government. This created a lot of interest in PSUs.

Looking ahead to the upcoming budget, Minocha believes there will be a big focus on selling off parts of PSUs to boost resources, along with spending in energy, railways, and defense. He believes these steps are aimed at making PSUs more efficient and aligning them with India’s long-term growth plans.

To invest in these funds, it’s important to have a long-term plan or a good understanding of the sector. It’s crucial to avoid making quick decisions based on short-term trends.

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